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How much would the company pay the treasurer

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Question - The year-end audit of the records of Pateros Farms disclosed a shortage in cash amounting to P200,000. The treasurer had concealed the fraud by increasing inventories by P150,000, land by P50,000 and accounts receivable by P100,000.

Faced with prosecution, the treasurer offered to surrender 3,000 Pateros Farms shares owned by him. The board of directors accepted the offer, with the agreement that the treasurer would pay any deficiency between the shortage and the book value of the shares, after adjusting for the fraud. The corporation would in turn pay the excess, if any,of the book value over the shortage.

As of December 31, 2019, there were 20,000 common shares issued and outstanding witha par value of P100; Retained earnings as of January 1, 2019 was P800,000 and net income from 2019 operations was P700,000.

1. How much would the company pay the treasurer, if any?

2. What would be the book value per share for purposes of the agreement?

3. Assuming further the company distributes the 6,000 shares as dividend to the remaining stockholders, what would be the balance of the Retained earnings as of December 31, 2005?

Reference no: EM132429304

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