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 Irom 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 (600,000) 1,150,000 Current Assets P.P.E Accumulated Depreciation Total 300,000 1,000,000 Liabilities Ordinary shares, P10 par, 100,000 shares Share Premium 100,000 (250,000) 1,150,000 Retained Earnings (deficit) Total Assuming that the cuasi reorgarization shall be accomplished as follows: a. Property, plant and equipment are to be reduced to their present fair market vale of P80,000 b. Inventorles are to be written down by P50,000 C. Uraccrued I abilities shall be recogrized at P15C,000 d. Ordinary shares are to be reduced toa par value of P5 What Is the balance of share prem um 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 Irom 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 (600,000) 1,150,000 Current Assets P.P.E Accumulated Depreciation Total 300,000 1,000,000 Liabilities Ordinary shares, P10 par, 100,000 shares Share Premium 100,000 (250,000) 1,150,000 Retained Earnings (deficit) Total Assuming that the cuasi reorgarization shall be accomplished as follows: a. Property, plant and equipment are to be reduced to their present fair market vale of P80,000 b. Inventorles are to be written down by P50,000 C. Uraccrued I abilities shall be recogrized at P15C,000 d. Ordinary shares are to be reduced toa par value of P5 What Is the balance of share prem um after the quasi reorganization?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5Q: Your supervisor is on the companys capital investment decision team that is to decide on...
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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
(600,000)
1,150,000
Current Assets
P.P.E
Accumulated Depreciation
Total
3.
Liabilities
300,000
Ordinary shares, P10 par, 100,000 shares
Share Premium
1,000,000
100,000
(250,000)
1,150,000
Retained Earnings (deficit)
Total
Assuming that the cuasi reorgarization 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. Uraccrued I abilities shall be recogrized at P15C,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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