Page 1 of 5
CPA REVIEW SCHOOL OF THE PHILIPPINES
M a n i l a
AUDIT OF STOCKHOLDERS’ EQUITY - QUIZZERS
PROBLEM NO. 1
began operations on January 1, 2005.
The company was
authorized to issue 60,000 shares of P10 par value common stock and 120,000 shares of
10%, P100 par value convertible preferred stock.
In connection with your audit of the company’s financial statements, you noted the
following transactions involving stockholders’ equity during 2005:
Issued 1,500 shares of common stock to the corporation promoters in
exchange for property valued at P510,000 and services valued at
The property costs P270,000 3 years ago and was carried on
the promoters’ books at P150,000.
Issued 30,000 shares of convertible preferred stock at P150 per share.
Each share can be converted to five shares of common stock.
corporation paid P225,000 to an agent for selling the shares.
Sold 9,000 shares of common stock at P390 per share.
paid issue costs of P75,000.
Received subscriptions for 12,000 shares of common stock at P450 per
Issued 2,100 shares of common stock and 4,200 shares of preferred
stock in exchanged for a building with a fair market value of P1,530,000.
The building was originally purchased for P1,140,000 by the investors
and has a book value of P660,000.
In addition, 1,800 shares of common
stock were sold for P720,000 cash.
Payments in full for half of the subscriptions and partial payments for the
rest of the subscriptions were received.
Total cash received was
Shares of stock were issued for the fully paid subscriptions.
Declared a cash dividend of P10 per share on preferred stock, payable
on December 31 to stockholders of record on December 15, and P20
per share cash dividend on common stock, payable on January 15, 2006
to stockholders of record on December 15.
Paid the preferred stock dividend.
Net income for the first year of operations was P1,800,000.
Based on the above and the result of your audit, determine the following as of December
1. Common stock
2. Paid-in capital in excess of par value of preferred stock