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 Statement of Financial Position As of the year ended December 31, 2021 Current assets P 250,000 Property, plant and equipment 1,500,000 Accumulated Depreciation (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 retained earnings account as of 31 December 2019?
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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