EXERCISE 2 PAGE 226

A) Date of declaration:
Retained Earnings 500,000
Cash Dividends Payable 500,000
P100 x 10% x 50,000 shs = P500,000
#
Date of payment:
Cash Dividends Payable 500,000
Cash 500,000
#
B) Date of declaration:
Retained Earnings 250,000
Cash Dividends Payable 250,000
P5 x 50,000 shs = P250,000
#
Date of payment:
Cash Dividends Payable 250,000
Cash 250,000
#
C) Date of declaration:
Retained Earnings 750,000
Property Dividends Payable 750,000
P15 x 50,000 shs = P750,000
#
Date of payment:
Property Dividends Payable 750,000
Merchandise Inventory 750,000
#
D) Date of declaration:
Retained Earnings 1,500,000
Property Dividends Payable 1,500,000
50,000 shs x 2 = P100,000 x 15 = P1,500,000
#
Date of payment:
Property Dividends Payable 1,500,000
Investment in SMB 1,500,000
#
E) Date of declaration:
Retained Earnings 1,100,000
Stock Dividends for Distribution 1,100,000
50,000 shs x 22% = 11,000 X P100 = P1,100,000
#
Date of payment:
 Stock Dividends for Distribution 1,100,000
Share Capital 1,100,000
#
F) Date of declaration:
Retained Earnings 720,000
Stock Dividends for Distribution 600,000
Share Premium from Stock Dividends 120,000
50,000 shs x 12% = 6,000 X P120 = P720,000
50,000 shs x 12% = 6,000 X P100 = P600,000
50,000 shs x 12% = 6,000 X P20 = P120,000
#
Date of payment:
Stock Dividends for Distribution 600,000
Share Capital 600,000
#
EXERCISE 3 PAGE 226
A) P500,000 is not allowable for the cash dividend declaration as the
cash available is only P300,000.

B) The cash dividend declaration is possible because the company has

enough cash to pay for the dividends.
EXERCISE 4 PAGE 226
F) After the declaration:
Paid in Capital:
Ordinary Share Capital, par P100, authorized 200,000 shs,
issued 50,000 shs 5,000,000
Stock Dividend for Distribution 600,000
Additional Paid in Capital:
Share Premium 230,000
Share Premium for Stock Dividends 120,000
Retained Earnings
Total Shareholders' Equity

After the distribution of dividends:

Paid in Capital:
Ordinary Share Capital, par P100, authorized 200,000 shs,
issued 56,000 shs
Additional Paid in Capital:
Share Premium 230,000
Share Premium for Stock Dividends 120,000
Retained Earnings
Total Shareholders' Equity
5,600,000

350,000
1,580,000
7,530,000

5,600,000

350,000
1,580,000
7,530,000
EXERCISE 5 PAGE 226
A) Issued P6,000,000 / 100= 60,000 - 1,000 TS 59,000
Subcribed P2,000,000 /100 20,000
No. of shares entitled to dividends 79,000

B) 11/15/2024 Retained Earnings 1,185,000

Cash Dividends Payable 1,185,000
79,000 shs x P15 = P1,185,000
#
1/10/2025 Cash Dividends Payable 1,185,000
Cash 1,185,000
#

C) Retained Earnings 2,000,000

Less: Cash Dividend declared 1,185,000
Treasury Shares 550,000 1,735,000
Free retained earnings 265,000
EXERCISE 8 PAGE 227
A) The preference share is non-cumulative and non -participating
Preference
P3,000,000 x 12% x 1 yr 360,000
Remainder to Ordinary
Total 360,000
Dividend per share 12.00

Retained Earnings 900,000

Cash Dividends Payable -Preferred
Cash Dividends Payable -Ordinary

B) The preference share is participating

Preference
P3,000,000 x 12% x 1 yr 360,000
P1,000,000 x 12%
Remainder: (900,000-360,000-120,000=P420,000)
Preference: 3/4 x P420,000 315,000
Ordinary 1/4 x P420,000
Total 675,000
Dividend per share 22.50

Retained Earnings 900,000

Cash Dividends Payable -Preferred
Cash Dividends Payable -Ordinary

C) The preference share is cumulative

Preference
P3,000,000 x 12% x 2 yrs 720,000
Remainder to Ordinary
Total 720,000
Dividend per share 24.00

Retained Earnings 900,000

Cash Dividends Payable -Preferred
Cash Dividends Payable -Ordinary

D) The preference share is both cumulative and participating

Preference
P3,000,000 x 12% x 2 yrs 720,000
 P1,000,000 x 12%
Remainder: (900,000-720,000-120,000=P60,000)
Preference: 3/4 x P60,000 45,000
Ordinary 1/4 x P60,000
Total 765,000
Dividend per share 25.50

Retained Earnings 900,000

Cash Dividends Payable -Preferred
Cash Dividends Payable -Ordinary

E) The preference share is participating only up to 15%

Preference
P3,000,000 x 12% x 1 yr 360,000
P1,000,000 x 12%
15% - 12% = 3% x P3,000,000 90,000
Balance to Ordinary (P420,000 - 90,000)
Total 450,000
Dividend per share 15.00

Retained Earnings 900,000

Cash Dividends Payable -Preferred
Cash Dividends Payable -Ordinary
Ordinary Total
360,000
540,000 540,000
540,000 900,000
27.00

360,000
540,000

Ordinary Total
360,000
120,000 120,000

315,000
105,000 105,000
225,000 900,000
11.25

675,000
225,000

Ordinary Total
720,000
180,000 180,000
180,000 900,000
9.00

720,000
180,000

Ordinary Total
720,000
 120,000 120,000

45,000
15,000 15,000
135,000 900,000
6.75

765,000
135,000

Ordinary Total
360,000
120,000 120,000
90,000
330,000 330,000
450,000 900,000
22.50

450,000
450,000
EXERCISE 9 PAGE 227-228
A) 6,000 shs x P50 300,000

B) P500,000 + 120,000 = P620,000 / 50,000 12.40

C) P53 - 50 = P3 x 6,000 shs 18,000

D) P8,400 / 350 24.00

E) P86,000 + P167,000 - 50,000 203,000

F) Preference Shares - 6% par, 10,000 shs

authorized, 6,000 shs issued 300,000
Ordinary Shares -mP10 par, 80,000 shs
authorized, 50,000 shs issued 500,000
Paid in cap in exess of par - preference 18,000
Paid in cap in exess of par - ordinary 120,000
Retained Earnings, Dec 31 203,000
Treasury Shares (350 ordinary at cost) (8,400)
Total Shareholders' Equity 1,132,600
EXERCISE 15 PAGE 230-231
A) Earnings Per Net Income - Dividends for Preferred
=
Share (EPS) Average Outstanding Common Shares

P1,750,000 - (18% x 7,500,000)

=
(80,000 + 85,600 - 2,000)/2

P1,750,000 - 1,350,000
=
163,600 /2

400,000
=
81,800

= 4.89

It means that a share of stock is earning P4.89

B) Total Shareholders' Equity

Less: Preference Shareholders' Equity
Par Value #REF!
Dividend right (7,500,000 x 18% x 1 yr) #REF!
Ordinary Shareholders' Equity

Book Value per Share:

Preference (P8,850,000 /150,000 shs)
Ordinary (P15,052,000/ (85,600 shs - 2,000 TS)

It means that a preference share owns P59 of net assets and ordinary share owns P180.05 of net assets.
 #REF!

#REF!
#REF!

#REF!
180.05

ns P180.05 of net assets.