This problem is from a book. Martis Co. had the following selected information in its December 31,
Question:
This problem is from a book.
Martis Co. had the following selected information in its December 31, 2019 Stockholders' Equity
portion of its balance sheet:
10% Preference shares, P100 par value, 50,000 shares authorized,
10,000 shares issued and outstanding P1,000,000
Ordinary shares, P50 par value, 100,000 shares authorized,
50,000 shares issued. 2,500,000
Share premium on preference shares 250,000
Share premium on ordinary shares 500,000
Accumulated profits 2,350,000
Treasury shares, 10,000 shares (750,000)
Transactions in 2020 are as follows:
a. On February 4, the company reissued 4,000 treasury shares at P90 per share.
b. On March 1, the company issued 5,000, P1,000 12% bonds payable with detachable warrants.
Two warrant is attached to each P1,000 bond. The bonds which pay semi-annual interest
every June 30 and December 31 were issued at total lump sum of P5,500,000. On the date of
issuance, the bonds were quoted at 105 (excluding accrued interest) without the warrants
while each warrant can be sold in the market at P25. Five warrants surrendered together with
P65 exercise price entitle the holder to acquire one ordinary share. Warrants can be exercised
2 years from the date of the issuance.
c. On April 15, stock rights were issued to ordinary shareholders. Ten stock rights plus P55 per
share entitle the holder to acquire one additional ordinary share.
d. On June 1, 60% of the warrants issued with the bonds were exercised.
e. On August 15, all but 6,000 stock rights were exercised by the ordinary shareholders.
f. On December 1, the remaining treasury shares were retired.
g. Adjusted net income for the year amounted to P1,250,000.
Based on the information above, answer the following:
18. What is the correct amount to be allocated to the ordinary share warrants as a result of the
transaction on March 1?
19. What is the credit to the share premium account as a result of the exercise of the stock warrants
on June 1?
20. What is the credit to the share premium account as a result of the exercise of the stock rights on
August 15?
21. Entry to record the retirement of treasury shares on December 1 shall involve:
a. Debit to share premium - Treasury at P30,000.
b. Debit to retained earnings at P30,000.
c. Credit to share premium - Treasury at P60,000.
d. Credit to share premium - Ordinary shares at P60,000
22. What is the total Additional paid in capital as of December 31, 2020?
Expert Answer:
