EXERCISE I 7The Skinny Red Company has a deficit in retained earnings of P 1,000,000. Business appears to be turning around, so thepresident wants the company to go through a quasi-reorganization. The statement of financial position of the company priorto the reorganization contains the following information:Current assetsP 500,000Land1,500,000Buildings5,000,000Liabilities1,000,000Accumulated Depreciation1,000,000Ordinary share capital, 20 par value6,000,000Retained earnings (Deficit)(1,000,000)As part of the quasi-reorganization, the current assets and buildings are to be written down by P 100,000 and P 300,000,respectively. Ordinary share capital is to be exchanged and will be restated at a legal capital of P 4,000,000. The resultingadditional paid in capital will be used to cancel the resulting deficit.REQUIRED:a.) Journal entries to record the quasi-reorganization.b.) A statement of financial position immediately after the quasi-reorganization.

The question is based on the concept of Financial Accounting.

Answered: The Skinny Red Company has a deficit in…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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