The condensed balance sheets of Ayayai Limited, a small private company that follows ASPE, follow for the periods immediately before, and one year after, it had completed a financial reorganization: Before One Year Before One Year Reorganization After Reorganization After Current assets $200,000 $300,000 Common shares $2,300,000 $1,550,000 Buildings (net) 1,800,000 1,380,000 Contributed surplus 200,000 (Deficit) retained earnings (500,000 ) 130,000 $2,000,000 $1,680,000 $2,000,000 $1,680,000 For the year following the financial reorganization, the company reported net income of $155,000 and depreciation expense of $70,000, and paid a cash dividend of $25,000. As part of the reorganization, the company wrote down inventory by $100,000 in order
The condensed balance sheets of Ayayai Limited, a small private company that follows ASPE, follow for the periods immediately before, and one year after, it had completed a financial reorganization: Before One Year Before One Year Reorganization After Reorganization After Current assets $200,000 $300,000 Common shares $2,300,000 $1,550,000 Buildings (net) 1,800,000 1,380,000 Contributed surplus 200,000 (Deficit) retained earnings (500,000 ) 130,000 $2,000,000 $1,680,000 $2,000,000 $1,680,000 For the year following the financial reorganization, the company reported net income of $155,000 and depreciation expense of $70,000, and paid a cash dividend of $25,000. As part of the reorganization, the company wrote down inventory by $100,000 in order
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The condensed balance sheets of Ayayai Limited, a small private company that follows ASPE, follow for the periods immediately
before, and one year after, it had completed a financial reorganization:
Before
One Year
Before
One Year
Reorganization
After
Reorganization
After
Current assets
$200,000
$300,000
Common shares
$2,300,000
$1,550,000
Buildings (net)
1,800,000
1,380,000
Contributed surplus
200,000
(Deficit) retained earnings
(500,000 )
130,000
$2,000.000
$1,680,000
$2,000,000
$1,680,000
For the year following the financial reorganization, the company reported net income of $155,000 and depreciation expense of
$70,000, and paid a cash dividend of $25,000. As part of the reorganization, the company wrote down inventory by $100,000 in order
to reflect circumstances that existed before the reorganization. Also, the deficit, and any revaluation adjustment, was accounted for by
charging amounts against contributed surplus until it was eliminated, with any remaining amount being charged against common
shares. The common shares are widely held and there is no controlling interest. No purchases or sales of plant assets and no share
transactions occurred in the year following the reorganization.
Prepare all the journal entries made at the time of the reorganization. (Credit account titles are automatically indented when the amount is
entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)
Account Titles and Explanation
Debit
Credit
(To record impairment of assets that existed
before reorganization)
(To eliminate deficit)
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