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CHAPTER 9

Operations, Dividends, Book Value and Earnings per Share

E 9-1
Contributed Capital:
10% Preference Share Capital, P100 par, cumulative, 10,000 shares
authorized, 4,000 shares issued and outstanding P 400,000
Ordinary Share Capital, P20 par, 100,000 shares authorized,
50,000 shares issued and outstanding 1,000,000
Ordinary Share Capital Subscribed – 10,000 shares 200,000
Preference Share Premium 150,000
Ordinary Share Premium 200,000
Total Contributed Capital P1,950,000
Retained Earnings 250,000
Total Shareholders’ Equity P2,200,000

E 9-2
Contributed Capital:
10% Preference Share Capital, P40 par, 40,000 shares authorized,
20,000 shares issued and outstanding P800,000
Preference Share Capital Subscribed P40,000
Less PSC Subscription Receivable 14,000 26,000
Ordinary Share Capital, P10 stated value, 500,000 shares authorized,
200,000 shares issued and outstanding 2,000,000
Paid-in Capital in Excess of Par – Preference Shares 120,000
Paid-in Capital in Excess of Stated Value – Ordinary Shares 100,000
Total Contributed Capital P3,046,000
Retained Earnings 400,000
Total Shareholders’ Equity P3,446,000

E 9-3
Mar. 1 Retained Earnings 400,000
Dividends Payable 400,000
40,000 sh x P10 = P400,000

Apr. 15 Dividends Payable 400,000


Cash 400,000

Sept. 1 Retained Earnings 800,000


Dividends Payable 800,000
40,000 sh x P20

30 Dividends Payable 800,000


Cash 800,000

E 9-4
Apr. 1 Retained Earnings 200,000
Dividends Payable 200,000
100,000 sh x P2
  APC  – Chapter 9 (2007 edition) page 2

May 2 Dividends Payable 200,000


Cash 200,000

June 1 Retained Earnings 600,000


Stock Dividends Distributable 500,000
PIC from Stock Dividends 100,000
100,000 sh x 10% x P60

July 15 Stock Dividends Distributable 500,000


Ordinary Share Capital 500,000

E 9-5
1. Retained Earnings 1,875,000
Stock Dividends Distributable 750,000
PIC from Stock Dividends 1,125,000
500,000 sh x 15% x P25 = P1,875,000
500,000 sh x 15% x P10 = P 750,000

Stock Dividends Distributable 750,000


Ordinary Share Capital 750,000

2. Retained Earnings 2,500,000


Stock Dividends Distributable 2,500,000
500,000 sh x 50% x P10 = P2,500,000

Stock Dividends Distributable 2,500,000


Ordinary Share Capital 2,500,000

E 9-6
Mar. 15 Retained Earnings 10,000
Dividends Payable 10,000
2,000 sh x P5 = P10,000

Apr. 15 Dividends Payable 10,000


Cash 10,000

July 15 Retained Earnings 40,000


Property Dividends Payable 40,000
2,000 sh x P20

Property Dividends Payable 40,000


Investment in Pentagon Corp. Stocks 40,000

Oct. 15 Retained Earnings 15,000


Stock Dividends Distributable 15,000
2,000 sh x 30% x P25

Dec. 1 Stock Dividends Distributable 15,000


Ordinary Share Capital 15,000
  APC  – Chapter 9 (2007 edition) page 3
E 9- 7
1.
Annual PSC dividend requirement – 100,000 sh x P100 x 12% = P1,200,000
2007 2008 2009
  APC  – Chapter 9 (2007 edition) page 4

2009
Regular dividends P1,200,000 P 600,000 P1,800,000
Balance –P  4,700,000
Preference – 10/15 3,133,333 3,133,333
Ordinary – 5/15 1,566,667 1,566,667
Total P4,333,333 P2,166,667 P6,500,000

Dividends per share P43.33 P4.33


4.
Preference Ordinary Total
2007
Dividends in arrears – 2 yrs. P2,400,000 P2,400,000
Current dividends 100,000 P ----------- 100,000
Total P2,500,000 P ----------- P2,500,000

Dividends per share P25.00 P – 0--


2008
Dividends in arrears P1,100,000 P1,100,000
Regular dividends 1,200,000 P 600,000 1,800,000
Balance – P600,000
Preference – 10/15 400,000 400,000
Ordinary – 5/15 200,000 200,000
Total P2,700,000 P 800,000 P3,500,000

Dividends per share P27.00 P1.60


2009
Regular dividends P1,200,000 P 600,000 P1,800,000
Balance – P4,700,000
Preference – 10/15 3,133,333 3,133,333
Ordinary – 5/15 1,566,667 1,566,667
Total P4,333,333 P2,166,667 P6,500,000

Dividends per share P43.33 P4.33


5.
Preference Ordinary Total
2007
Regular dividends P1,200,000 P600,000 P1,800,000
Balance – P700,000
Preference – 10/15 466,667 466,667
Ordinary – 5/15 233,333 233,333
Total P1,666,667 P833,333 P2,500,000

Dividends per share P16.67 P1.67


2008
Regular dividends P1,200,000 P 600,000 P1,800,000
Balance – P1,700,000
Preference 800,000 800,000
Ordinary 900,000 900,000
Total P2,000,000 P1,500,000 P3,500,000
  APC  – Chapter 9 (2007 edition) page 5

Dividends per share P20.00 P3.00

2009
Regular dividends P1,200,000 P 600,000 P1,800,000
Balance – P4,700,000
Preference 800,000 800,000
Ordinary 3,900,000 3,900,000
Total P2,000,000 P4,500,000 P6,500,000

Dividends per share P20.00 P9.00

E 9-8
1. P2,500,000 / 200,000 shares P12.50

2. Total Shareholders’ Equity P2,500,000


Equity identified with preference shares (10,000 sh x P120) 1,200,000
Equity identified with ordinary shares P1,300,000

BV/share: PS – P120.00; OS – P13.00

E 9-9
a. P10,000/60,000 = P.17
 b. P70,000/60,000 = P1.17
c. P90,000/60,000 = P1.50
d. P150,000/60,000 = P2.50
e. P180,000/60,000 = P3.00

E 9-10
Profit P450,000
Less earnings identified with preference share capital 200,000
(20,000 sh x P100 x 10%)
Earnings identified with ordinary shares P250,000

Earnings per share P250,000/300,000 = P.83

P 9-1
1.
2009
Jan. 2 Cash 1,875,000
Ordinary Share Capital 1,250,000
Ordinary Share Premium 625,000
125,000 sh x P15

Mar. 2 Cash (62,500 sh x P20) 1,250,000


Ordinary Share Capital 625,000
Ordinary Share Premium 625,000
  APC  – Chapter 9 (2007 edition) page 14

Retained Earnings
Appropriated for contingencies P250,000
Appropriated for Bond Retirement 300,000
Total P550,000
Unappropriated 400,000 950,000
Total Shareholders’ Equity P3,500,000

Multiple Choice
1. B 4. C 7. B 10. B 13. C 16. A 19. A
2. B 5. A 8. C 11. A 14. D 17. B 20. D
3. B 6. A 9. D 12. D 15. B 18. C

TM 32
1. T 5. F 9. F 13. T 17. T
2. T 6. F 10. F 14. T 18. F
3. T 7. F 11. T 15. F 19. T
4. T 8. F 12. F 16. F 20. F

TM 33
1. Contributed capital 9. Small share capital dividend
2. Share Capital 10. Dividends in arrears
3. Share premium 11. Deficit
4. Liquidating dividend 12. Book value per share
5. Scrip dividend 13. Unappropriated Retained Earnings
6. Dividends 14. Retained Earnings
7. Appropriated Retained Earnings 15. Participating Preference Share Capital
8. Property dividend 16. Paid-in Capital from Stock Dividend
17. Carrying value
18. Stock Dividend Distributable
19. Stock Dividend
20. Earnings per share

TM 34
1. A 6. C 11. C 16. A 21. D
2. B 7. A 12. C 17. C 22. B
3. D 8. A 13. D 18. B 23. A
4. D 9. D 14. D 19. C 24. B
5. B 10. A 15. D 20. A 25. D

TM 35
1. C ABC – P5.00; DEF – P12.00
2. D P252,000 + P116,550 + P118,420 + P116,000 + P12,000 = P614,970
3. B P614,970 + P38,390 = P653,360
4. B 400 sh x P50 x 6% = P1,200
5. A PS = P48,000; CS – P180,000 – P48,000 = P132,000
6. A PS = P48,000 / 6,000 = P8.00; CS = P132,000 /12,000 = P11.00
7. B P801,400 – P601,100 = P200,300
8. B 60,000 x 40% x P20 = P480,000
9. C P20 x 40%
10. D
  APC  – Chapter 9 (2007 edition) page 15

TM 36
1. P1,500,000 75,000 sh x P20
2. P750,000 75,000 sh x P10
3. P2,250,000 P1,500,000 + P750,000
4. P150,000 P500,000 – P350,000
5. P2,400,000 P2,250,000 + P150,000
6. P32 P2,400,000/75,000
7. P4.67 P350,000/75,000
8. P6.67 P500,000/75,000

TM 37
1. P4.00 P50 x 8%
2. P24,450,000 P450,000 + P16,000,000 + P8,000,000
3. 9,000 sh P450,000 / P50
4. 1,600,000 sh P16,000,000 / P10
5. P72,000 P450,000 x 8% x 2 years
6. P68 LV + Div. in arrears = P60 + (P4 x 2 years) = P68
7. P16.67 [P21,450,000 – (9,000 x 68)]/ 1,600,000 sh

TM 38
Year Share
capital Case1 Case 2 Case 3 Case 4

2005 Preference P114,286 P114,286 P 60,000 P 60,000


Ordinary 285,714 285,714 340,000 340,000

2006 Preference P 64,286 P64,286 P60,000 P60,000


Ordinary 160,714 160,714 165,000 165,000

2007 Preference P37,500 P37,500 P37,500 P37,500


Ordinary --------- --------- ----------- ----------

2008 Preference P75,000 P60,000 P75,000 P60,000


Ordinary --------- 15,000 ---------- 15,000

2009 Preference P 91,071 P 85,714 P 67,500 P 60,000


Ordinary 208,929 214,286 232,500 240,000