FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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A company has suffered operating losses for some time but is now operating profitably and expects to continue to do so. Current and projected income, however, will not be sufficient to eliminate the deficit in the near term. It also appears that plant assets are overstated considering current prices and economic conditions. After receiving permission from government authorities and approval from the shareholders, the board of directors of Boeing Corporation decided to restate the company’s assets and paid-in capital balances in order to remove the deficit. A balance sheet for the company just prior to this action is presented as follows:
A Company
As of the year ended December 31, 2021
|
Current assets |
P 250,000 |
|
Property, plant and equipment |
1,500,000 |
|
|
(600,000) |
|
Total assets |
P 1,150,000 |
|
|
|
|
Liabilities |
P 300,000 |
|
Ordinary Shares, 10 par, 100,000 shares |
1,000,000 |
|
Share premium |
100,000 |
|
Deficit |
(250,000) |
|
Total liabilities and equity |
P 1,150,000 |
Assuming that the quasi reorganization shall be accomplished as follows:
- Property, plant and equipment are to be reduced to their fair market value of P800,000.
- Inventories are to be written down by P50,000.
- Unaccrued obligation shall be recognized at P150,000.
- The par value of ordinary Shares will be reduced to P5.
What is the balance of the
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