Professional Documents
Culture Documents
Amount
P410,000
220,000
50,000
210,000
460,000
30,000
900,000
45,000
112,000
400,000
4,000
3,000
20,000
500,000
100,000
50,000
25,000
220,000
150,000
100,000
15,000
20,000
Share capital
Treasury Shares
Share premium
Share premium from treasury shares
Accumulated Profits
885,000
442,500
963,500
350,000
1,327,500
1,313,500
P 2,641,000
The Company had the following shareholders equity transactions during 2010:
Jan. 15 Completed the building renovation for which P350,000 of retained earnings
had been restricted. Paid the contractor P328,300, all of which is capitalized.
Mar. 3
1 per share.
May 18 Declared a dividend of P1.50 per share to be paid on July 31, 2014, to
shareholders of record on June 30, 2014.
June 19 Approved additional building renovation to be funded internationally. The
estimated cost of the project is P400,000, and retained earnings are to be
restricted for that amount.
July 31 Paid the dividend.
Auditing Practice II
Workbook
Four thousand shares were issued for cash at P48 per share.
Nov. 30 Burberry purchased 4,600 of its own ordinary shares on the open market at
P39 per share.
Dec. 15 Burberry declared a 5% stock dividend for shareholders of record on
January 15, 2014, to be issued on January 31, 2014. Burberry was having a
liquidity problem and could not afford a cash dividend at that time.
Burberrys ordinary shares were selling at P52 per share on December 15,
2013.
Auditing Practice II
Workbook
2014
June 20 Burberry sold 1,100 of its own ordinary shares that it had purchased on
November 30, 2013, for P47,000.
Preference Shares
Burberry issued 100,000 preference shares at P47 per share on July 1, 2012.
Cash Dividends
Burberry has followed a schedule of declaring cash dividends in December and June
with payment being made to shareholders of record in the following month. The cash
dividends which have been declared since inception of the company through June 30,
2014, are shown below:
Declaration Date
12/15/12
06/15/13
12/15/13
Ordinary Shares
P0.30 per share
P0.30 per share
---
Preference Shares
P1.50 per share
P1.50 per share
P1.50 per share
No cash dividends were declared during June 2014 due to the companys liquidity
problems.
Retained Earnings
As of June 30, 2013, Burberrys retained earnings account had a balance of
P1,830,000. For the fiscal year ending June 30, 2014, Burberry reported a net
income of P130,000.
In March 2013, Burberry received a term loan from Dior Cartier Bank. The bank
requires Burberry to establish a sinking fund and restrict retained earnings for an
amount equal to the sinking fund deposit. The annual sinking fund payment of
P150,000 is due on April 30 each year; the first payment was made on schedule on
April 30, 2014.
Required:
a. Journal entries to record the transactions from 2011 to 2014.
b. Compute the balances of the following accounts as of June 30, 2014:
i. Ordinary share capital account
ii. Share premium ordinary shares (including treasury shares)
iii. Unappropriated retained earnings
iv. Number of ordinary shares issued and outstanding
v. Total shareholders equity
250,000.00
150,000.00
104,000.00
750,000.00
1,254,000.00
1st Term, AY 2014-2015
Page 8-4
Preference shares
Ordinary shares
Share premium
Treasury shares
Unappropriated Retained Earnings
Current assets
Property, plant, and equipment
(net)
Total assets
Ordinary shares
Share premium
Retained earnings
Total shareholders equity
5,600,000
6,800,000
7,400,000
730,000
(1,330,000)
P
6,800,000
1,670,000
4,140,000
5,810,000
5,890,000
160,000
(240,000)
5,810,000
Auditing Practice II
Workbook
Required:
Prepare all the journal entries made at the time of the quasi-reorganization.
12 percent and the company expects this rate of increase to continue over the next
two years.
By the end of 2014, a further six employees have left. The entity now expects only
four more employees will leave during 2015. Product sales have increased by 18
percent. The company now expects that sales will average 15 percent or more over
the three-year period.
By the end of 2015, a further three employees have left. The entitys sales have
increased by an average of 16 percent over the three years.
Required:
a. Compensation expense, 2013
b. Compensation expense, 2014
c. Compensation expense, 2015
Phantom shares represent the right of an employee to receive cash payments equivalent to
5,500 shares as if the employee were given an actual share of stock in the company. The
employee never actually owns shares and thus obtains no shareholder rights under the plan.
1
Auditing Practice II
Workbook
The entity estimates the fair value of the SAR at the end of each year in which a
liability exists as show below. At the end of 2015, all SAR held by the remaining
employees vest. The intrinsic values of the SAR at the date of exercise (which equal
the cash paid out) at the end of 2015, 2016, and 2017 are also shown below:
Year
Fair Value
2013
2014
2015
2016
2017
P 28
30
33
41
Intrinsic Value
P 36
39
48
Required:
a.
b.
c.
d.
P5,000,000
1,000,000
3,000,000
Auditing Practice II
Workbook
Prepare and audit working paper showing the retrospective adjustment to retained
earnings (accumulated profits) and a rollforward analysis of the Companys
Stockholders Equity.
Auditing Practice II
Workbook