Reference no: EM132785457
An entity provided the following statement of financial position on December 31, 2017 prior to quasi-reorganization:
Current assets..................................................................................1,500,000
Property, plant & equipment....................8,500,000
Accumulated depreciation......................(1,400,000) 7,100,000
Total.......................................................................................................8,600,000
Liabilities.............................................................................................6,600,000
Share capital, P100 par, 50,000 shares..............................4,000,000
Retained earnings.........................................................................(2,000,000)
Total.......................................................................................................8,600,000
On December 31, 2017, the shareholders and creditors agreed to a quasireorganization. Accordingly, the following restatements should be made:
a. The property, plant and equipment shall be recorded at the fair value of P6,000,000.
b. The inventory is overvalued to the extent of P750,000 and shall be revalued accordingly.
c. The share capital is reduced to P750,000, 7,500 shares P100 par value.
d. Liabilities are overvalued by 600,000. The resulting deficit is charged to the share premium arising from the reorganization.
REQUIRED:
problem 1: Prepare journal entries to record the transactions. Then, prepare condensed financial statement after the quasi-reorganization.