Memory Aide for Partnership and Corporation

Minimum Subscription 25% of authorized shares = subscribed 25% of subscribed shares = paid Paid-in capital (issued shares) not less than P 5000

B. Noncash Asset Proceeds recorded at order of priority: (1) fair value of consideration received, (2) fair value of shares issued, (3) par value of shares Ex. Issued 100 shares, par P1, for equipment with fair value of P500. Shares have fair value of P2 at that time.

Ex. Authorized shares of P60,000. Subscribed (60,000x25%) = 15,000 Paid (15,000x25%) = 3,750 (wrong) REMEMBER: paid not less than 5,000. So Paid-in capital is 5,000. Component of Shareholder‟s Equity (Ballada) Journal Entry Method Paid-in (Contributed) Capital: Authorized Shares xx Unissued shares (xx) xx Subscribed share capital xx subscription receiv. (xx) xx Share Premium xx xx

Memorandum Entry Method Paid-in (Contributed) Capital: Preference Shares xx Ordinary Shares xx Subscribed share capital xx subscription receiv. (xx) xx Share Premium xx xx

Earned capital: Retained earnings - appropriated Retained Earnings - unappropriated

xx

Earned capital: Retained earnings - appropriated Retained Earnings - unappropriated

xx

Treasury Shares

Treasury Shares

xx xx

Total Shareholder‟s Equity XX

Terms Term Authorized share capital Issued share capital Subscribed share capital Subscription receivable Share premium

Treasury share Outstanding stock Delinquent Shares

xx xx

Total Shareholder‟s Equity XX

Definition Maximum number of share the corp can issue Sold and paid in full Portion of authorized capital subscribed but not yet paid in full Amount yet to be paid from subscribed share capital Excess of consideration over par Issued shares acquired by corp. Issued shares in the hand of shareholder Subscribed shares not yet paid on due date and subscriber defaulted

Issuance of shares A. Cash @ par or Cash xx stated value Share Capital xx Above par or Cash xx SV Share Capital xx Share Premium xx Below par or Cash SV Discount on share capital Share Capital

100 400 100 100 100

C. Services/Liability Value of Services: Market value of services Liability: Amount of liability Stock subscription Record subscription

xx xx

(1) Equipment 500 Share Capital Share Premium (2) Equipment 200 Share Capital Share Premium (3) Equipment 100 Share Capital

Valuation Par or stated value (for no-par) Par or stated value (for no-par) Par or stated value (for no-par) Consideration given

Consideration less par (or stated value) Cost

Subscription Receivable Subscribed share capital Share Premium (if there is excess) Installment Cash Payment/Full Payment Subscription Receivable Issuance Subscribed share capital Share Capital Note: Subscribed share capital – always at par (or stated value). Shares are issued only if fully paid. Delinquent shares Highest bidder – willing to pay the “offer price” for smallest number of shares Ex. Roman subscribed 100 shares, P2 par. He made payment of P100. He defaulted. At public auction, 3 bidders were: Romeo 90 shares, Roda 80 shares, Romolo 88 shares. Offer price is P150, including expenses of 50. Note: expenses incurred in public auction is charged to „Receivable from highest bidder‟. Treasury Share Valued at cost (cost method) Not an asset. Reported as deduction from shareholders‟ equity Reduces outstanding shares Purchase of Treasury Treasury shares share Cash Reissuance at cost Cash Treasury shares Reissuance above cost Cash Treasury shares Share premium – treasury shares Reissuance below cost Cash Share Premium – TS/Retained Earnings Treasury shares

Retirement with gain xx xx xx

Note: The corporation code prohibits issuance at a discount. Discount on share capital is liability of shareholder (not loss of corp). IT IS DEDUCTION FROM SHAREHOLDERS‟ EQUITY.

Retirement with loss

Note: “loss” is debited first to share premium-TS, second to Retained earnings. If share premium-TS is exhausted, then debit R/E. Share Capital Share Premium-retirement Treasury Stock Share Capital Share Premium Treasury stock Note: “loss” is debited in order of priority: (1) share premium of original issuance, (2) share premium – TS, (3) Retained earnings

Donated Capital If immaterial: credited to Share Premium If material: credited to Donated Capital Item Donated Asset Donated shares

Entry Asset Donated Capital Received: Memorandum entry: “Received xx shares as donation”

Valuation Consideration received

Note: donated shares reduce outstanding shares Reissued: Cash Donated Capital

Value of issued shares