On January 1, 20×1, the shareholders equity section of Splash Corporations statement of financial position disclosed the following information: 12.5% convertible preference shares (P40 par value; 150,000 shares authorized, 60,000 shares issued and outstanding) P2,400,000 Ordinary shares (P5 par value; 600,000 shares authorized, 360,000 shares issued and outstanding) 1,800,000 Share premium 9,000,000 Retained earnings 13,500,000 Total shareholders equity P26,700,000 The following equity transactions occurred during 20×1 and 20×2: 1. On February 1, 20×1, 45,000 ordinary shares were acquired by the company for P33 per share. 2. On August 30, 20×1, 15,000 preference shares were converted to ordinary shares. One (1) preference share is convertible into one (1) ordinary share. At the time of conversion, the ordinary shares had a market value of P42 per share. 3. On December 12, 20×1, the company placed a share subscription of 30,000 ordinary shares at a subscription price of P33 per share. The subscription contract required a cash down payment equal to 60% of the subscription price, with the balance due on February 1, 20×2. 4. On February 1, 20×2, 25,500 ordinary shares were issued according to the subscription contract. However, 4,500 shares were not issued because the subscriber defaulted. The subscription contract requires the subscriber to forfeit all cash advances. 5. On April 28, 20×2, 30,000 shares held as treasury shares were reissued at P50 per share. 6. On May 19, 20×2, a special dividend of preference shares was distributed to ordinary shareholders. One hundred (100) ordinary shares entitled a shareholder to one (1) preference share. The market price of preference shares was P40 at the time. 7. Cash dividends are declared for preference and ordinary shares on April 30 and October 31 of each year. Semiannual cash dividends for ordinary shares are P0.50 per share. 8. Splash Corporation reported a net income of P1,890,000 in 20×1 and P2,760,000 in 20×2. REQUIRED: a. Prepare journal entries for the equity transactions above. b. Compute the following balances: 1. Share premium on December 31, 20×1 ____________ 2. Share premium on December 31, 20×2
