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 For 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 P1,150,000
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 For 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 P1,150,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
1. What is the balance of the retained earnings account as of 31 December 2019?
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.
2. What is the balance of the retained earnings account as of 31 December 2019?
Transcribed Image Text: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
For 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
P1,150,000
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