ARISE Co. 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 the government authorities and approval from shareholders, the board of directors decides to restate the company assets and paid-in capital balances in order to remove the deficit and make possible the declaration of dividends from profitable- operations. A balance sheet for the company just prior to this action is presented: Current Assets 250,000 P.P.E 1,500,000 Accumulated Depreciation (600,000) Total 1,150,000 Liabilities 300,000 Ordinary shares, P10 par, 100,000 shares 1,000,000 100,000 (250,000) Share Premium Retained Earnings (deficit) Total 1,150,000 Assuming that the quasi reorganization shall be accomplished as follows: a. Property, plant and equipment are to be reduced to their present fair market value of P800,000 b. Inventories are to be written down by P50,000 c. Unaccrued liabilities shall be recognized at P150,000 d. Ordinary shares are to be reduced to a par value of P5 What is the balance of share premium after the quasi reorganization?
ARISE Co. 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 the government authorities and approval from shareholders, the board of directors decides to restate the company assets and paid-in capital balances in order to remove the deficit and make possible the declaration of dividends from profitable- operations. A balance sheet for the company just prior to this action is presented: Current Assets 250,000 P.P.E 1,500,000 Accumulated Depreciation (600,000) Total 1,150,000 Liabilities 300,000 Ordinary shares, P10 par, 100,000 shares 1,000,000 100,000 (250,000) Share Premium Retained Earnings (deficit) Total 1,150,000 Assuming that the quasi reorganization shall be accomplished as follows: a. Property, plant and equipment are to be reduced to their present fair market value of P800,000 b. Inventories are to be written down by P50,000 c. Unaccrued liabilities shall be recognized at P150,000 d. Ordinary shares are to be reduced to a par value of P5 What is the balance of share premium after the quasi reorganization?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter11: Depreciation, Depletion, Impairment, And Disposal
Section: Chapter Questions
Problem 5C: The following two statements concern depreciation: 1. Because our plant was shut down for part of...
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Transcribed Image Text:ARISE Co. 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 the government authorities and approval from shareholders, the board
of directors decides to restate the company assets and paid-in capital balances in order
to remove the deficit and make possible the declaration of dividends from profitable
operations. A balance sheet for the company just prior to this action is presented:
250,000
1,500,000
Current Assets
P.P.E
(600,000)
1,150,000
Accumulated Depreciation
Total
Liabilities
300,000
Ordinary shares, P10 par, 100,000 shares
1,000,000
100,000
(250,000)
Share Premium
Retained Earnings (deficit)
Total
1,150,000
Assuming that the quasi reorganization shall be accomplished as follows:
a. Property, plant and equipment are to be reduced to their present fair market
value of P800,000
b. Inventories are to be written down by P50,000
C. Unaccrued liabilities shall be recognized at P150,000
d. Ordinary shares are to be reduced to a par value of P5
What is the balance of share premium after the quasi reorganization?
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