The Larisa Company is exiting bankruptcy reorganization with the following accounts: Book ValueFair ValueReceivables$80000$90000Inventory200000210000Buildings300000400000Liabilities300000300000Common stock330000 Additional paid-in capital20000 Retained earnings (deficit)(70000) The company’s assets have a $760,000 reorganization value. As part of the reorganization, the company’s owners transferred 80 percent of the outstanding stock to the creditors.Prepare the journal entry that is necessary to adjust the company’s records to fresh start accounting.

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Answered: The Larisa Company is exiting…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The Larisa Company is exiting bankruptcy reorganization with the following accounts:

	Book Value	Fair Value
Receivables	$80000	$90000
Inventory	200000	210000
Buildings	300000	400000
Liabilities	300000	300000
Common stock	330000
Additional paid-in capital	20000
Retained earnings (deficit)	(70000)

The company’s assets have a $760,000 reorganization value. As part of the reorganization, the company’s owners transferred 80 percent of the outstanding stock to the creditors.
Prepare the journal entry that is necessary to adjust the company’s records to fresh start accounting.

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