PROBLEM 1: You were assigned to audit the shareholders’ equity of Glory Inc. for the year ended December31, 2019. Glory Corp. was incorporated in early 2018 when it was authorized by SEC to issue 500,000 ordinary shares (P10 par) and 100,000 convertible preference shares (P20 par). The following schedule reflects the company’s capital balances as of December 31, 2018:
PREPARE
PROBLEM 1: You were assigned to audit the shareholders’ equity of Glory Inc. for the year ended
December31, 2019. Glory Corp. was incorporated in early 2018 when it was authorized by SEC to issue
500,000 ordinary shares (P10 par) and 100,000 convertible preference shares (P20 par). The following
schedule reflects the company’s capital balances as of December 31, 2018:
Ordinary shares, 100,000 shares issued during the company’s P 1,400,000
incorporation in exchange of a land with a fair value of P1.4 M.
Preference shares, 50,000 shares issued during the company’s 2,500,000
incorporation at P50 per share. Each
to four ordinary shares
Retained earnings, which is the company’s net income in 2018 540,000
Total shareholders’ equity P 3,440,000
Your inquiries and investigation revealed the following transactions, which occurred in 2019:
a. On January 15, the company reacquired 20, 000 ordinary shares (from the 2018 issue) at P22 per
share and reverted them to treasury since it intends to reissue the same.
b. On February 11, the company reissued 4,000 treasury shares at P28 per share.
c. On March 5, the company reissued 6,000 treasury shares at P19 per share.
d. On April 1, the company retired 5,000 treasury shares.
e. On May 12, 20,000 preference shares were converted to ordinary shares.
f. On June 9, 15,000 shares were subscribed for a total amount of P175,000
g. On July 4, a 2 for 1 share split was affected for the ordinary share.
h. On August 8, the company reissued 3,000 treasury shares at P8 per share.
i. The company issued 4,000 ordinary shares for P11 per share.
j. The company registered an adjustments net income in 2019 at P830,000.
Compute for the adjusted balances of the following as of December 31, 2019:
1. Ordinary shares
2. Preference shares
3. Share premium- Ordinary shares
4. Share premium- Preference shares
5. Share premium- Treasury shares
6. Total additional paid-in capital
7. Total contributed capital
8. Total
Step by step
Solved in 4 steps with 2 images
