Reference no: EM132924244
Questions -
Q1. Z Corporation is a public enterprise whose shares are traded in the over-the-counter market. At December 31, 2019, Z had 6,000,000 authorized shares of $10 par value ordinary shares, of which 2,000,000 shares were issued and outstanding. The shareholders' equity accounts at December 31, 2019, had the following balances:
Ordinary Shares $20,000,000
Additional Paid-in capital $7,500,000
Retained earnings $6,400,000
Transactions during 2020 and other information relating to the shareholders' equity accounts were as follows:
a. On January 5, 2020, the corporation issued at $54 per share, 100,000 shares of $50 par value, 9% cumulative convertible preference shares. Each preference share is convertible, at the option of the holder, into two ordinary shares. The corporation had 600,000 authorized preference shares. The preference share has a liquidation value equal to its par value.
b. On February 1, 2020, the corporation reacquired 20,000 of its ordinary shares for $16 per share, Z eses the cost method to account for treasury share.
c. On April 30, 2020, the corporation sold 500,000 shares (previously unissued) of $10 par value ordinary shares to the public at P17 per share.
d. On June 18, 2020, the corporation declared a cash dividend of $1 per ordinary share, payable on July 12, 2020, to shareholders of record on July 1, 2020.
e. On November 10, 2020, the corporation sold 10,000 treasury shares for $21 per share
f. On December 14, 2020, the corporation declared the yearly cash dividend on preference shares, payable on January 14, 2021, to shareholders of record on December 31, 2020.
g. On January 20, 2021, before the books were closed for 2020, the corporation became aware that the ending inventories at December 31, 2019 were understated by $300,000 (after tax effect on 2019 net income was $180,000). The appropriate correction entry was recorded the same day
h. After correcting the beginning inventory, net income for 2020 was $4,500,000.
Required -
1. Prepare statement of retained earnings for the year ended December 2020. Assume the only single-period financial statements for 2020 are presented.
2. Prepare the shareholders' equity section of the Z Financial Position at December 31, 2020.
3. What is the book value per share of ordinary shares at December 31, 2020?
Q2. The following data were compiled prior to preparing the balance sheet of the Conviction Corporation as of December 31, 2005:
Authorized common stock, P100 par value P4,000,000
Cash dividends payable 160,000
Donated capital 800,000
Gain on sale of treasury stock 80,000
Net unrealized loss on available for sale securities 96,000
Premium on capital stock 320,000
Premium on bonds payable 240,000
Reserve for bond sinking fund 400,000
Reserve for depreciation 600,000
Revaluation increment on property 800,000
Retained earnings, unappropriated 720,000
Subscribe capital stock 480,000
Stock subscriptions receivables 120,000
Stock warrants outstanding 200,000
Treasury stock, at cost 144,000
Unissued common stock 800,000
REQUIRED -
How much is the Common stock issued?
How much is the Additional paid-in capital (APIC)?
How much is the Appropriated retained earnings?
How much is the Total stockholders' equity?
How much is the Legal capital?
Q3. Discuss the audit objectives and substantive procedures in an audit of owner's equity. Make table summary of the management assertions, audit objectives and substantive tests for the shareholder's equity. Give examples of audit working papers for shareholder's equity. Explain briefly.