PROBLEM 1: Roxxy Corp. was formed on July 1, 2011.

It was authorized to issue

1,200,000 shares of P10 par value ordinary shares and 400,000 shares of 8%, P25 par
value, cumulative and nonparticipating preference share1 Roxxy Corp’s fiscal year
ends every June 30. The following is a summary of the shareholders account of Roxxy
Corp.

Ordinary Shares:

Prior to 2013:
A. 380,000 shares were issued for cash on July 1, 2011, at P31 per share.
B. On July 24, 2011, 20,000 shares were exchanged for a parcel of land which cost
the seller P280,000 in 2005 and had an estimated market value of P880,000 on July
24, 2011.
C. 40,000 shares were issued on March 1, 2013; the shares had been subscribed for
P42 per share on October 31, 2012.
D. On December 31, 2012, a P0.30 cash dividends were declared to shareholders of
record January 15, 2013, to be paid on January 31, 2013.

2013:
A. On June 15, 2013, a P0.30 cash dividends were declared to shareholders of record
July 15, 2013, to be paid on July 31, 2013.
B. On October 1, 8,000 shares were issued for cash at P46 per share.
C. On November 30, Roxxy Corp. purchased 8,000 of its own ordinary shares on the
open market at P39 per share.
D. On December 31, Roxxy Corp. declared a 5% stock dividend for shareholders of
record on January 15, 2014, to be issued on January 31, 2014. Roxxy Corp. was having
a liquidity problem and could not afford a cash dividend at that time.
Roxxy Corp.’s ordinary shares were selling at P52 per share on December 15, 2013.

2014:
A. On June 20, Roxxy sold 2,000 of its own ordinary shares that it had purchased on
November 30, 2013, for PB4,000.

Preference Shares:

Prior to 2013:
A. Roxxy Corp. issued 200,000 preference shares at P44 per share on July 1, 2012.
B. On December 15, 2012, a P1 cash dividends were declared to preference shareholders
as of record January 15, 2015, to be paid on January 31, 2013.
C. On June 15, 2013, a P1 cash dividends were declared to preference shareholders as
of record July 15, 2013, to be paid on July 31, 2013.

D. On December 15, 2013, a P1 cash dividends were declared to preference shareholders

as of record January 15 2014, to be paid on January 31, 2014.

Retained Earnings:

A. As of June 30, 2013, Roxxy Corp’s retained earnings account had a balance of
P2,760,000. For the fiscal year ending June 30, 2014, Roxxy Corp. reported net income
of P160,000.

B. In March 2013, Roxxy Corp. received a term loan from PBN Bank. The bank required
Roxxy Corp. to establish sinking fund and restrict retained earnings for an amount
equal to the sinking fund deposit. The annual sinking fund deposit of P200,000 due
on April 30 of each year; the first deposit was made on schedule on April 30, 2014.

Requirements:

1. What is the ordinary share capital account balance at June 30, 2014?
2. What is the total share premium from ordinary shares including share premium from
treasury shares (if any) as at June 30, 2014?
3. What is the correct unappropriated retained earnings as of June 30, 2014?
4. What is the total shareholders’ equity as of June 30, 2014?