The Larisa Company is exiting bankruptcy reorganization with the following account balances: Net Book Value Fair Value Receivables $ 80,000 $ 90,000 Inventory 200,000 210,000 Buildings 300,000 400,000 Liabilities 800,000 800,000 Common stock 130,000 Additional paid-in capital 20,000 Retained earnings (deficit) (370,000) Larisa Company’s assets have a $760,000 reorganization value. As part of the reorganization plan, the company’s owners transferred 80 percent of the outstanding stock to the creditors in exchange for a $500,000 reduction in the liabilities. Required: Prepare the journal entry (or entries) necessary to adjust the company’s records to fresh start accounting. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
The Larisa Company is exiting bankruptcy reorganization with the following account balances: Net Book Value Fair Value Receivables $ 80,000 $ 90,000 Inventory 200,000 210,000 Buildings 300,000 400,000 Liabilities 800,000 800,000 Common stock 130,000 Additional paid-in capital 20,000 Retained earnings (deficit) (370,000) Larisa Company’s assets have a $760,000 reorganization value. As part of the reorganization plan, the company’s owners transferred 80 percent of the outstanding stock to the creditors in exchange for a $500,000 reduction in the liabilities. Required: Prepare the journal entry (or entries) necessary to adjust the company’s records to fresh start accounting. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The Larisa Company is exiting bankruptcy reorganization with the following account balances:
| Net Book Value | Fair Value | |
|---|---|---|
| Receivables | $ 80,000 | $ 90,000 |
| Inventory | 200,000 | 210,000 |
| Buildings | 300,000 | 400,000 |
| Liabilities | 800,000 | 800,000 |
| Common stock | 130,000 | |
| Additional paid-in capital | 20,000 | |
| (370,000) |
Larisa Company’s assets have a $760,000 reorganization value. As part of the reorganization plan, the company’s owners transferred 80 percent of the outstanding stock to the creditors in exchange for a $500,000 reduction in the liabilities.
Required:
Prepare the
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
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