TRANSACTION Jan 2 Makati Corporation is authorized to

TRANSACTION Jan. 2 Makati Corporation is authorized to issue 10, 000 common shares, no par, stated value P 100. 00 and 18% cumulative 5, 000 preferred shares, with par value of P 200. The incorporators subscribed the 25% of the P/S at par and 30% C/S at stated value. JOURNAL ENTRIES Authorized to issue 5, 000 18% cumulative preferred shares , par value of P 200 and 10, 000 common shares, no par but with stated value of P 100. Subscription Receivable –P/S 250, 000 Subscription Receivable-C/S 300, 000 Subscribed P/S 250, 000 Subscribed C/S 300, 000 They were required to make downpayment of 25% on each class of stock. Cash 137, 500 The unpaid balance was due in Subscription Receivable-P/S two equal installments on Feb 28 62, 500 and March 30. Subscription Receivable-C/S 75, 000

LEGAL CAPITAL • Aggregate of the par value of all issued par value shares • Aggregate of the cash and the value of any contributions paid for all issued no par value shares. For example, if Sunny incorporates Sunny Sunglasses Shop and issues 25, 000 common stock shares at $1 par value. If Sunny receives $2 per share: Entries as follows: Account Debits Cash $50, 000 Credits - Common Stock @ Par, $1, 25, 000 Shares - $25, 000 Common Share Premium - $25, 000

Legal Capital � Legal capital is the amount of the total proceeds received from the issuance of stock. � In this example, legal capital would equal $50, 000. � In other words, Corporation Code does not allow the payment of dividends and stock buybacks in excess of Retained Earnings.

Delinquent Stock � When stock subscription is not paid on call date or on the date fixed by the Board. � The Law provides for a 30 -day period from subscription date or from call date � When not paid within the period, the whole subscription will be declared delinquent � The unpaid subscription will be sold in a public auction to the highest bidder.

Delinquent Stock � Highest bidder is the one who is willing to pay the full amount of unpaid subscription for the least number of shares and will also pay the accrued interest, advertising and selling cost of delinquent shares

Example A subscribed to 100 Subscription Receivable-C/S 10, 000 common shares at Subscribed C/S 10, 000 P 100 par. 25% Downpayment Cash 2, 500 by A. Balance due in Subscription Receivable-C/S equal installments on June 30 and July 30. 2, 500 Payment of 1 st installment. Cash 3, 750 Subscription Receivable-C/S 3, 750 After 30 days notice, A failed to pay the balance. Due from Highest Bidder 3, 750 Subscription Receivable-C/S 3, 750 Incurred P 500 advertising cost. Due from Highest Bidder Cash 500

Example: Delinquent Stocks The highest bidder, E bids for 75 shares and paid the amount due including interest of P 425. Cash 4, 675 Due from Highest Bidder Interest Issued certificates to A Subscribed C/S 10, 000 for 25 shares and E 75 Common Share Capital shares. 4, 250 425 10, 000

Treasury Shares � TREASURY STOCK � a. recorded at cost b. acquired through purchase or donation c. sold at cost , above cost and below cost. d. sufficient retained earnings before acquiring own stock

Treasury Shares � Common Shares P 50 par � Share Premium C/S � Retained Earnings P 500, 000 100, 000 200, 000 Reacquired 500 shares at P 60 Treasury Shares Cash Sold 100 Treasury Shares for P 60. Cash Sold 100 Treasury Shares for P 10, 000 Cash Sold 100 Treasury Shares at P 40 Cash Treasury Share Premium Treasury Shares 30, 000 6, 000 10, 000 Treasury Shares Treasury Share Premium 4, 000 2, 000 30, 000 6, 000 4, 000 6, 000

Treasury shares Sold 100 Treasury shares at P 30 Cash Treasury Share Premium Retained Earnings Treasury Shares 3, 000 2, 000 1, 000 6, 000 Sold 10 shares at P 50 per share Cash Retained Earnings Treasury Shares 500 100 Appropriation of RE for unsold TS Retained Earnings Appropriated for TS 5, 400 Retired the unsold 90 shares of TS Common Share Capital Share Premium-C/S Treasury Shares 4, 500 900 Reversal of appropriation Appropriated for TS Retained Earnings 5, 400 600 5, 400