2020. Charlie Corp. was incorporated in early 2019 when it was authorized by SEC to issue 500,000
ordinary shares (P50 par) and 100,000 preference shares (P20 par). The following schedule reflects
the company’s capital balances as of December 31, 2019:
Ordinary shares, 100,000 shares issued during the company’s incorporation in
exchange of a land. The fair value of the land was not clearly determinable on
the date of share issuance while the shares were selling in the market at P55
Preference shares, 200,000 share issued during the company’s incorporation
at P30 per share.
Retained earnings, which is the company’s net income in 2019 2,980,000
Total shareholders’ equity ?
Your inquiries and investigation revealed the following transactions, which occurred in 2020:
a. On March 1, the company received subscriptions for 50,000 ordinary shares at P70 per share
from five subscribers (10,000 shares each). The subscribers were required to pay 25% of the
subscriptions price in cash as down payment with balance to be settled after 3 months.
b. June 1, the company received the balance from three share subscribers on March 1. Shares
were therefore issued. The other two defaulted on the balance. As per agreement, the
company auctioned out the defaulted shares and incurred P120,000 in auction expenses.
c. On September 1, the highest bidder on the defaulted shares was selected and the amount due
was collected. The amount due includes a 12% annual interest on the subscriptions’ receivable
d. On October 1, the company issued 20,000 preference shares for P840,000. Each preference
share was issued with five warrants. Two warrants can be exercised to purchase one ordinary
shares at P55 per share. The preferences shares were currently selling in the market at P34
per share while each warrant can be sold separately at P1.20 per warrant.
e. On November 12, 60% of the warrants were exercised.
f. On December 5, a debt restructuring agreement was entered with a debtor for an overdue
loans payable outstanding amounting to P800,000 with unpaid interest of P80,000. The debtor
agreed as a concession to accept 10,000 ordinary shares in full settlement of the loan. This
agreement is outside the normal/original credit term. Ordinary shares are currently selling at
this time at P78 per share.
g. The company registered an adjusted net income in 2020 at P1,390,000.
Based on the information above, determine the adjusted balance of the following as of Dec. 31, 2020:
1. Ordinary Shares
2. Preference Share
3. Share premium – Ordinary shares
4. Share premium – Preference shares
5. Ordinary share warrants outstanding
6. Total additional paid-in capital
7. Total contributed capital
8. Total stockholders’ equity