Reference no: EM132978296
Question - Boracay had the following stockholders' equity account balances at December 31, 2020
Preference shares 1,800,000
Share premium from preference shares 90,000
Ordinary shares 5,150,000
Share premium from ordinary shares 3,500,000
Accumulated profits 4,000,000
Net unrealized loss on available for sale securities 245,000
Treasury ordinary shares 270,000
Boracay's preferred and ordinary shares are traded on the over-the-counter market. At December 31, 2020, Boracay had 100,000 authorized shares of Php 100 par, 10% cumulative preference shares and 3,000,000 authorized share of no par ordinary shares with a stated value of Php 5 per share.
Transactions during 2021 and other information relating to the stockholders' equity accounts were as follows:
a. On January 10, 2021, Boracay formally retired all the 30,000 shares of its treasury ordinary shares and had them revert to unissued basis. The treasury stock had been acquired on January 20, 2018. These shares were originally issued at Php 10 per share.
b. Boracay owned 10,000 shares of LOTR, Inc. Ordinary shares purchases in 2020 for Php 65 per share. The LOTR shares was included in Boracay's trading securities portfolio which were selling at Php 68 per share at the end of 2020. On February 15, 2021, when the fair value of LOTR shares was at Php 70, Boracay declared a dividend in kind of one share of LOTR for every hundred shares of Boracay ordinary shares held by stockholders of record on February 28, 2021. The dividend in kind was distributed on march 12, 2021, when the fair value of LOTR shares was at Php 75.
c. On April 1, 2021, share rights were issued to the ordinary stockholders (1 share right for every 1 share issued and outstanding) permitting the purchase of one new share of ordinary share in exchange for four rights and Php 11 cash. On April 25, 2021, 840,000 stock rights were exercised when the market price of Boracay's ordinary share was Php 13 per share. Boracay issued new shares to settle the transaction. The remaining 160,000 rights were not exercised thus expired.
d. On January 1, 2018, Boracay granted share options to employees ofr the purchase of 100,000 shares of the company's ordinary share at Php 8 per share. The options had a fair value of Php 2. No entry had been made by the company to reflect the option grant in 2018. The options are exercisable within a three-year period beginning January 1, 2021. On July 1, 2021, the employees exercised 80,000.
Boracay used news hares to settle the transaction.
e. On December 12, 2021, Boracay declared the yearly cash dividend on preferred stock, payable on January 14, 2022, to stockholders of record on December 31, 2021.
f. After year-end adjustment, the net unrealized loss on available for sale securities account had a debit balance of Php 135,000 at December 31, 2021.
g. On January 1, 2022, before the accounting records were closed for 2021, Boracay became aware that the rent income for the year ended December 31, 2020 was overstated by Php 500,000.
The after tax-effect on the 2020 net income was Php 275,000. The appropriate correcting entry was recorded the same day.
h. After all adjusting entries were effected the adjusted net income for 2021 was at Php 2,600,000.
Required - Determine the following balances as of December 31, 2021
1. What is the total contributed capital?
2. What is the total stockholders' equity?