Reference no: EM132787594
Forevermore Corporation was formed on July 1, 2017. It was authorized to issue 300,000 shares of P20 par value ordinary share and 100,000 shares of 8% P50 par value, cumulative and nonparticipating preference share. Forevermore Corporation has a fiscal year ending of June 30.
The following information relates to the shareholders' equity accounts of Forevermore Corporation:
Ordinary share
Prior to the 2019 - 2020 fiscal year, Forevermore Corporation has 110,000 shares of outstanding ordinary share issued as follows:
- 95,000 shares were issued for cash on July 1, 2017, at P62 per share.
- On July 24, 2017, 5,000 ordinary shares were exchanged for a plot of land which cost the seller P140,000 in 2004 and had an installment market value of P440,000 on July 24, 2017.
- 10,000 shares were issued on March 1, 2018; the shares had been subscribed for P84 per share on October 31, 2018.
During the 2019 - 2020 fiscal year, the following transactions regarding ordinary share took place:
October 1, 2019
- Subscriptions were received for 10,000 shares at P92 per share. Cash of P184,000 was received in full payment for 2,000 shares and share certificates were issued. The remaining subscription for 8,000 shares were to be paid in full by September 30, 2020, at which time the certificates were to be issued.
November 30, 2019
- Forevermore Corporation purchased 2,000 shares of its own share on the open market at P78 per share. Forevermore Corporation uses the cost method for treasury shares.
December 15, 2019
- Forevermore declared a 5% stock dividend for shareholders of record on January 15, 2020. Forevermore Corporation was having a liquidity problem and could not afford a cash dividend at that time. Forevermore Corporation's ordinary share was selling at P104 on December 15, 2019.
June 20, 2020
- Forevermore Corporation sold 500 shares of its own ordinary share that it had purchased on November 30, 2019, for P42,000.
Preference share
- Forevermore Corporation issued 50,000 shares of preference share at P88 per share on July 1, 2018.
Cash dividends
Forevermore Corporation has followed a schedule of declaring cash dividends in December and June with payment being made to shareholders of record in the following month.
The cash dividends which have been declared since inception of the company through June 30, 2020 are shown below:
Declaration date Ordinary share Preference share
December 15, 2018 P0.60 per share P2.00 per share
June 15, 2019 P0.60 per share P2.00 per share
December 15, 2019 - P2.00 per share
No cash dividends were declared during June 2020, due to the company's liquidity problem.
Retained earnings
- As of June 30, 2019, Forevermore Corporation's retained earnings account had a balance of P1,380,000. For the fiscal year ending June 30, 2020, Forevermore Corporation reported net income of P80,000.
- In March of 2019, Forevermore Corporation received a loan from Side A Bank. The bank requires Forevermore Corporation to establish a sinking fund and restrict retained earnings for an amount equal to the sinking fund deposit. The annual sinking fund payment of P100,000 is due on April 30 each year, the first payment was made on schedule on April 30, 2020.
Based on the information above, answer the following:
The journal entry to record the dividend in arrears on the preference share includes a debit to retained earnings amounting to
Question 1: How much is the increase in shareholders' equity as a result of the June 20, 2020 transaction?
Question 2: What is the balance of the Ordinary share account at June 30, 2020?
Question 3: What is the balance of the Treasury share account at June 30, 2020?
Question 4: What is the total additional paid-in capital at June 30, 2020?
Question 5: How much is the retained earnings at June 30, 2020?
Question 6: What is the total shareholders' equity at June 30, 2020?