Adverse financial and operating circumstances warrant that Closure Eyes Company should undergo a quasi-reorganization. The following information
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Adverse financial and operating circumstances warrant that Closure Eyes Company should undergo a quasi-reorganization.
The following information may be relevant in accounting for the quasi-reorganization:
- Inventory with a fair value of P2,000,000 is currently recorded in the accounts at cost of P2,500,000.
- Plant assets with a fair value of P7,000,000 are currently recorded at P8,500,000 net of accumulated depreciation.
- Individual shareholders contribute P4,000,000 to create additional capital to facilitate the reorganization. No new shares are issued.
- The par value of the share is reduced from P25 to P5.
The shareholders' equity before the quasi-reorganization comprised the following: Share capital, P25 par value, 100,000 shares authorized and outstanding - P2,500,000; Share premium - P1,750,000; and Retained earnings (deficit) - (P3,000,000).
After the quasi-reorganization, what is the balance of the share premium?
Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
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