Reference no: EM132953097
Question - Adverse financial and operating circumstances warrant that Ella Company undergoes quasi-reorganization at December 31, 2021. The following information may be relevant in accounting for the quasi reorganization.
Inventory with a fair of P5,000,000 is currently recorded in the accounts at its cost of P7,000,000.
Plant assets with a fair value of P20,000,000 are currently recorded at P24,000,000 net of accumulated depreciation.
A creditor agrees to extend the maturity date of a loan for five years, although interest as originally stated must continue to be paid.
Unrecorded accounts payable amount to P3,000,000.
Individual shareholders contribute P5,000,000 to additional paid-in capital to facilitate the reorganization. No new shares of outstanding shares pass to the company's creditors.
The par value of the ordinary shares is reduced from P100 to P50.
Immediately before these events, the shareholders' equity section appears as follows.
Ordinary shares, P100 par value 500,000 shares 50,000,000
Share premium 5,000,000
Retained earnings (deficit) (15,000,000)
Provide the answers and solutions.
1. What is the balance of share capital after quasi reorganization?
2. What is the balance of share premium after quasi reorganization?
3. What is the amount of shareholders' equity after quasi reorganization?
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