SHE

Question 1

Components of Equity

TROT

Answer 1

Total Contributed Capital
Retained Earnings
Other Comprehensive Income
Treasury Shares

Question 2

Contributed Capital

What are included?

Answer 2

Share Capital - at par
Subscribed SC - at par
Share Premium - excess over par
- Donated Capital
- Share Warrants and Options
- Share Dividend
- Recapitalization

Question 3

Legal Capital
- with Par Value
- without Par Value

Answer 3

With Par Value = SC + SSC + SP
SP → share dividends only
WIthout Par Value = SC + SSC + SP
SP → share dividends & excess over stated

Question 4

Contributed Capital vs Legal Capital
- both are SC + SSC + SP

What is the difference?

Answer 4

For Contributed Capital, SP is composed of all transactions
- Donated Capital
- Share Warrants and Options
- Share Dividend
- Recapitalization

Question 5

Subscription Receivable

General Rule? Exception?
Remember in Subscription Receivable

Answer 5

GR : contra-equity account (deducted)
XPN : if receivable within 12 months

NOTE : There’s Share Premium even if Subscribed only

Question 6

Measurement for Non Cash / Services

Answer 6

1. FV of non cash / service
2. FV of share
3. Par value

Question 7

Issuance of Ordinary / Preference For Lump Sum

With FV
Without FV

Answer 7

With FV → Allocate
Without FV → Residual Approach

Question 8

COSTS INCURRED
- Donation Costs
- Share Issuance Costs
- Public Offering / Listing Costs

What is the treatment for each?

Answer 8

Donation Cost → deducted from SP (not expensed)
Share Issuance Cost → deducted from SP then RE
- Contra-equity account (net of tax)

Public Offering / Listing Cost → expensed

Question 9

Rights Issue

Other Term and What to do?

Answer 9

pre-emptive right
memo entry only

Question 10

Redeemable vs Callable

Who is the liability? Who is the equity?
CE

Answer 10

Redeemable (Gain or Loss)
- Redeemable = Liability
- Dividends - interest expense

Callable (Share Premium or Retained Earnings)
- Callable = Equity
- Dividends - retained earnings

Question 11

Formula for Retained Earnings

Answer 11

RE, Beg
+/- Accounting Policy
+/- Prior Period Errors
=Adjusted RE, Beg

+/- Net Income (Loss)
less Dividends
less Appropriated RE
=Unappropriated RE, End

Question 12

When do you recognize dividends?
What is the journal entry if you recognize? if you pay dividends?
Who are entitled to dividends?

Answer 12

• @ date of declaration
• Dr. RE // Cr. Dividend Payable
• Dr. Dividend Payable // Cr. Kind of Dividend
• outstanding shares (issued + subscribed - treasury)

Question 13

How to get amount of cash dividend
- if ordinary share
- if preference share

Answer 13

Ordinary → per share
Preference → outstanding par value

Question 14

Property Dividend

What is the measurement of the dividend payable?
What is the measurement of the property?
Can there be an impairment loss?
Dividend Payable > Property = Gain or Loss?

Answer 14

Dividend Payable
- Fair Value of Asset (remeasured (1) @ BS date (2) @ distribution date)

Property (lower of)
- Carrying Amount
- FV less CTS

CA vs FV less CTS = Impairment Loss

Gain

Question 15

Share Dividend

Does the amount of equity change?
How to qualify for large / small share dividend?
How to measure large / small share dividend?

Answer 15

• From RE to Share Capital (ALOE remains the same)
• Large Share Dividend (20% and above) → Par value
• Small Share Dividend (19% and below) → FV at declaration date

Question 16

Recapitalization - disclosed for 3 years

3 Ways of Recapitalization
1. Par to No par (vice versa)
2. Reduction of par / stated
3. Share split (Up or Down)

Out of the 3, who needs Journal Entry?

Answer 16

1 and 2
- 3 = memo entry only

Question 17

Share Split (Part of Recapitalization)

Paano yung technique?

Answer 17

2 for 1
- yung word na “for” gawing “/”
- if reverse split, yung 2 ilagay sa pwesto ng 1 and vice-versa

Question 18

2 Steps in Quasi-Reorganization

Answer 18

1. Revalue A & L to FV → reflected to RE
2. If still deficit → recapitalize SC → SP → RE

Question 19

Treasury Shares
- cost method

if resold?
if retired?
some notes

Answer 19

cost method

Resold
- Price > Cost (Share Premium - TS)
- Price < Cost (SP - TS or Retained Earnings)

Retired
- Par > Cost (Share Premium - TS)
- Par < Cost (SP - Orig or SP - TS or Retained Earnings)

Every TS transaction → corresponding entry for appropriation of RE
TS → limit is balance of unappropriated RE (Trust Fund Doctrine)

Question 20

Technique in Solving SHE

3 Steps

Answer 20

1. Prepare SHE table
2. Monitor # of shares (Common/Preference)
3. Journal entry for some transactions