Auditing

CATLI, KRISTINE CAROLINE R.

BSA 5Y2-2

PRACTICAL AUDITING

Illustrative Audit Case 17.1: Analysis of Shareholder’s Equity Account

During May 2015, Glenn, Inc., was organized with 3,000,000 authorized shares of Ᵽ10 par value ordinary shares, and 300,000 of its ordinary shares were issued for Ᵽ3,300,000. Net income through December 31, 2015, was Ᵽ125,000.

On July 3, 2016, Glenn issued 500,000 of its ordinary shares for Ᵽ6,250,000. A 5% share dividend was declared on October 2, 2016, and issued on November 6, 2016, to shareholders of record on October 23, 2016. The market value of ordinary shares was Ᵽ11 per share on declaration date. Glenn’s net income for the year ended December 31, 2016, was Ᵽ350,000.

During 2017, Glenn had the following transactions:

1. In February, Glenn reacquired 30,000 of its ordinary shares for Ᵽ9 per share. Glenn uses the cost method to account for treasury shares.
2. In June, Glenn sold 15,000 of its treasury shares for Ᵽ12 per share.
3. In September, each shareholder was issued (for each share held) one right to purchase two additional ordinary shares for Ᵽ13 per share. The rights expire on December 31, 2017.
4. On October, 250,000 rights issues were exercised when the market value of ordinary share was Ᵽ14 per share.
5. In November, 400,000 rights issues were exercised when the market value of ordinary share was Ᵽ15 per share.
6. On December 15, Glenn declared its first cash dividend to shareholders of Ᵽ0.30 per share, payable on January 10, 2014, to shareholders of record on December 31, 2017.
7. On December 21, in accordance of applicable law, Glenn formally retired 10,000 of its treasury shares and had them revert to unissued basis. The market value of ordinary share was Ᵽ16 per share on this date.
8. Net income for 2017 was Ᵽ800,000.

REQUIRED:

Prepare a schedule of all transactions affecting the share capital (share and peso amounts), additional paid in capital, retained earnings, and the treasury shares (shares and peso amounts) and the amounts that would be included in Glenn’s statement of financial position at December 31, 2015, 2016, and 2017, as a result of the above transactions. Show supporting computations in good form.