The Larisa Company is coming out of reorganization with the following accounts:

Question

The Larisa Company is coming out of reorganization with the following accounts:

  

  

The company's assets have a $761,000 reorganization value. As part of the reorganization, the company's owners transferred 70 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.

Book Value Fair Value   Receivables $ 81,000       $ 92,000         Inventory 201,000       212,000         Buildings 301,000       402,000         Liabilities 301,000       301,000         Common stock 331,000         Additional paid-in capital 22,000         Retained earnings (deficit) (71,000)     

Explanation / Answer

The Larisa Company All Amounts in $ Receivables A/c 11000 Inventory A/c 11000 Building A/c 101000 Goodwill A/c 638000 To Revaluation Gain A/c 761000 Liabilities A/c 231700 To Common Stock A/c 231700

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