PROBLEM NO. 2
Following is the stockholders' equity section of Tenacity Corporation's balance sheet at
December 31, 2004:
Common stock, P10 par value; authorized 1,500,000
shares; issued and outstanding 900,000 shares P9,000,000
Additional paid-in capital 750,000
Retained earnings 2,700,000
Total stockholders' equity P12,450,000
Transactions during 2005 and other information relating to the stockholders' equity
accounts were as follows:
On July 1, 2005, a cash dividend of P1 per share was declared and paid to stockholders of record on July 1, 2005.
On August 15, each stockholder was issued one stock right for each share held to
purchase two additional shares of stock for P12 per share. The rights expire on
October 31, 2005.
On September 30, 150,000 stock rights were exercised when the market value of the
stock was P12.50 per share.
On November 2, Tenacity declared a two for one stock split-up and reduced the par
value of the stock from P10 to P5 per share. On November 20, shares were issued for
the stock split.
On December 5, 60,000 shares were issued in exchange for a secondhand equipment.
It originally cost P600,000, was carried by the previous owner at a book value of
P300,000, and was recently appraised at P390,000.
Net income for 2005 was P720,000.
QUESTIONS:
Based on the above and the result of your audit, determine the following as of December
31, 2005:
1. Common stock
a. P12,600,000 b. P10,800,000 c. P10,050,000 d. P12,300,000
2. Additional paid-in capital
a. P1,485,000 b. P1,575,000 c. P3,825,000 d. P1,275,000
3. Unappropriated retained earnings
a. P2,550,000 b. P2,422,500 c. P2,220,000 d. P2,190,000
4. Total stockholders' equity
a. P16,425,000 b. P14,295,000 c. P16,095,000 d. P16,065,000