A new CEO was hired to revive the floundering Champion Chemical Corporation. The company had enduredoperating losses for several years, but confidence was emerging that better times were ahead. The board ofdirectors and shareholders approved a quasi reorganization for the corporation. The reorganization includeddevaluing inventory for obsolescence by $105 million and increasing land by $5 million. Immediately prior tothe restatement, at December 31, 2018, Champion Chemical Corporation’s balance sheet appeared as follows (incondensed form):CHAMPION CHEMICAL CORPORATIONBalance SheetAt December 31, 2018($ in millions)Cash $ 20Receivables 40Inventory 230Land 40Buildings and equipment (net) 90$ 420Liabilities $ 240Common stock (320 million shares at $1 par) 320Additional paid-in capital 60Retained earnings (deficit) (200)$ 420Required:1. Prepare the journal entries appropriate to record the quasi reorganization on January 1, 2019.2. Prepare a balance sheet as it would appear immediately after the restatement.
A new CEO was hired to revive the floundering Champion Chemical Corporation. The company had endured
operating losses for several years, but confidence was emerging that better times were ahead. The board of
directors and shareholders approved a quasi reorganization for the corporation. The reorganization included
devaluing inventory for obsolescence by $105 million and increasing land by $5 million. Immediately prior to
the restatement, at December 31, 2018, Champion Chemical Corporation’s
condensed form):
CHAMPION CHEMICAL CORPORATION
Balance Sheet
At December 31, 2018
($ in millions)
Cash $ 20
Receivables 40
Inventory 230
Land 40
Buildings and equipment (net) 90
$ 420
Liabilities $ 240
Common stock (320 million shares at $1 par) 320
Additional paid-in capital 60
Retained earnings (deficit) (200)
$ 420
Required:
1. Prepare the
2. Prepare a balance sheet as it would appear immediately after the restatement.
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