Reference no: EM132860583
Question - In line with your audit of the MNO Company's capital transactions for the period ended December 31, 2020, you were furnished by the accountant the following ledger analysis of its Capital account.
DATE DESCRIPTION DEBIT CREDIT
1/1 Beginning Balance P4,450,000
1/8 Reacquisition of 30, 000 shares at P30 900,000
2/28 Issue of 20,000 (previously unissued) 500,000
P10 par ordinary shares at P25
4/1 Inventory obsolescence loss 200,000
5/1 2019 accrued operating expenses 40,000
6/3 Proceeds from reissuance of 5, 000 donated shares 155,000
7/15 Proceeds from reissuance of 20, 000 treasury shares 440,000
8/1 Retirement of the remaining treasury shares 460,000
9/4 Fair value of an equipment received from an unrelated 500,000 party as a donation
10/1 Declaration and distribution of 30, 000 shares as share dividends, fair value of shares on this date was P25 per 300,000 share
12/31 Revaluation Surplus on Properties and Equipment 2,500,000
12/31 Change for the period in the value of equity investment 200,000 to Profit or Loss
12/31 Change for the period in value of equity investment to 120,000
Other Comprehensive Income
12/31 Net income for the period 1,235,600
Audit Notes:
a. The beginning balance of the Capital account comprise of the following items
Total proceeds from 150, 000 ordinary shares issued to date P2,700,000
Accumulated profits and losses to date 1, 160,000
Accumulated increase in the value of its equity investment to OCT 590,000
b. The reissued donated shares on June 3 were received in the previous period from one of the company shareholders. The company had no entry in its records upon the receipt of the shares.
c. Based on the company's records, the treasury shares being retired on August 1 were originally issued at P10 per share.
Required -
1. The correct entry to record the reissuance of the treasury shares on July 15 shall involve:
a. Credit to share premium at 160,000
b. Debit to treasury shares at 600,000
c. Debit to accumulated profits at 160,000;
d. Debit to share premium at 160, 00
2. The correct entry to record the retirement of the remaining treasury shares on August 1 shall involve:
a. Credit to share premium at P100,000
b. Debit to share premium at P200,000
c. Debit to accumulated profits at P100,000
d. Credit to treasury shares at P100,000
3. What is the adjusted net income for 2020?
a. 1,235,600
b. 1,535,600
c. 1,735,600
d. 1,695,600
4. What is the correct accumulated profits balance as of December 31, 2020?
a. 2,295,600
b. 2,105,600
c. 1,885,600
d. 1,845,600
5. What is the total additional paid in capital as of December 31, 2020?
a. 1,005,000
b. 2,000,000
c. 1,850,000
d. 1,845,000
6. What is the adjusted balance of the ordinary shares account as of December 31, 2020?
a. 1,600,000
b. 1,900,000
c. 1,950,000
d. 2,000,000
7. What is the total stockholders' equity as of December 31, 2020?
a. 8,250,600
b. 8,720,600
c. 8,960,600
d. 9,006,600