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STOCKHOLDERS’ EQUITY

CASE I

ABC Corporation began operation on January 1, 2015. The company was authorized to issue 0,000

share o! "10 par #a$ue ordinary stoc% and 120,000 shares o! 10& "100 par #a$ue con#ertib$e

pre!erence stoc%. 'n connection with your e(amination o! the company)s !inancia$ statements, your

noted the !o$$owing transactions in#o$#ing stoc%ho$ders) e*uity during 2015+

Jan. 1 'ssued 1,500 shares o! ordinary stoc% to the corporation promoters in e(change !or

property #a$ued at "510, 000 and ser#ices #a$ued at "210,00. The property costs

"20,00 - years ago and was carried on the promoters) boo%s at "150,000.

Jan. -1 'ssued -0,000 shares o! con#ertib$e pre!erence stoc% at "150 per share. ach share

can be con#erted to !i#e shares o! ordinary stoc%. The corporation paid "225,000 to an

agent !or se$$ing the shares.

/eb. 15 o$d ,000 shares o! ordinary stoc% at "-0 per share. The corporation paid issue

costs o! "5,000.

ay -0 3ecei#ed subscriptions !or 12,000 shares o! ordinary stoc% at "450 per share.

Aug. -0 'ssued 2,100 share o! ordinary stoc% and 4,200 shares o! pre!erence stoc% in

e(change !or a bui$ding with a !air mar%et #a$ue o! "1,5-0,000. The bui$ding was

origina$$y purchased !or "1,140,000 by the in#estors and has a boo% #a$ue o! 

"0,000. 'n addition, 1,00 shares o! ordinary stoc% were so$d !or

"20,000 cash.

6o#. 15 "ayments in !u$$ !or ha$! o! the subscriptions and partia$ payments !or the rest o! the

subscriptions were recei#ed. Tota$ cash recei#ed was "4,200,000. hares o! stoc% were

issued !or the !u$$y paid subscriptions.

7ec. 1 7ec$ared a cash di#idend o! "10 per share on pre!erence stoc%, payab$e on 7ecember-1 to stoc%ho$ders o! record on 7ecember 15, and 20 per share cash di#idend on

ordinary stoc%, payab$e on January 15, 201 to stoc%ho$ders o! record on 7ecember

15.

7ec. -1 "aid the pre!erence stoc% di#idend.

6et income !or the !irst year o! operation was "1,00,000.

Based on the abo#e, determine the !o$$owing as o! 7ecember -1, 2015+

1. 8rdinary stoc%

2. hare premium o! pre!erence stoc%

-. hare premium o! ordinary stoc%

4. 3etained earnings

5. Tota$ stoc%ho$ders) e*uity

CASE II

9ou were ab$e to obtain the !o$$owing in!ormation pertaining to the corporation)s e*uity accounts. ABC

Corporation has -2,000 shares o! "2 par #a$ue common stoc% authorized. 8n$y 5& o! these shares

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ha#e been issued, and o! the shares issued, on$y 22,000 are outstanding. 8n 7ecember -1, 2015, the

stoc%ho$ders) e*uity section re#ea$ed that the ba$ance in "aid:'n Capita$ in (cess o! "ar ;a$ue <

Common was "-2,000, and the 3etained arnings ba$ance was "220,000. The Treasury stoc% was

purchased at an a#erage price o! "-.50 per share.

7uring 201, ABC had the !o$$owing transactions+

Jan. 15 ABC issued at "55 per share, 1,00 shares o! "50 par 5& cumu$ati#e pre!erred stoc%=

4,000 shares are authorized.

/eb. 01 ABC so$d -,000 shares o! new$y issued "2 par #a$ue common stoc% at "42 per share.

ar. 15 ABC dec$ared a cash di#idend on common stoc% o! "0.15 per share, payab$e on

Apri$ -0 to a$$ stoc%ho$ders o! record on Apri$ 1

Apr. 15 ABC reac*uired 400 shares o! its common stoc% !or "4- per share.

mp$oyees e(ercised 2,000 stoc% options granted in 2000. >hen the options were

granted, each option entit$ed the emp$oyees to purchase 1 share o! common stoc% !or"50 per share. The share price on the date o! grant was a$so "50 per share. ABC

issued new shares to the emp$oyees.

ay 01 ABC dec$ared a 10& stoc% di#idend to be distributed on June 1 to stoc%ho$ders o! 

record on ay . The mar%et price o! the common stoc% was "50 per share on ay 1.

  -1 ABC so$d -00 treasury shares reac*uired on Apri$ 15 and an additiona$ 400 shares

costing "15,000 that had been on hand since the beginning o! the year. The se$$ing

price was "5 per share.

ept.15 The semi:annua$ cash di#idend on common stoc% was dec$ared, amounting to "0.15

per share. ABC a$so dec$ared the year$y di#idend on pre!erred stoc%. Both are payab$eon 8ctober 15 to stoc%ho$ders o! record on 8ctober 1.

6et income !or 201 was "100,000. 7etermine the ba$ances o! the !o$$owing as o! 7ecember -1,

201+

1. "re!erred stoc%2. Common stoc%-. Additiona$ paid in capita$4. Treasury stoc%5. Tota$ retained earnings