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Ristoni Company is in the process of emerging from a Chapter 11 bankruptcy. It will apply fresh start accounting as of December 31, 2013. The company currently has 33,000 shares of common stock outstanding with a $231,000 par value. As part of the reorganization, the owners will contribute 22,000 shares of this stock back to the company. A retained earnings deficit balance of $349,000 exists at the time of this reorganization. |
| The company has the following asset accounts: |
| Book Value | Fair Value | |||
| Accounts receivable | $ | 106,000 | $ | 83,000 |
| Inventory | 100,000 | 75,000 | ||
| Land and buildings | 448,000 | 500,000 | ||
| Equipment | 77,000 | 65,000 | ||
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The company%u2019s liabilities will be settled as follows. Assume that all notes will be issued at reasonable interest rates. |
| %u2022 |
Accounts payable of $83,000 will be settled with a note for $8,000. These creditors will also get 1,000 shares of the stock contributed by the owners. |
| %u2022 |
Accrued expenses of $38,000 will be settled with a note for $7,000. |
| %u2022 |
Note payable of $103,000 (due 2017) was fully secured and has not been renegotiated. |
| %u2022 |
Note payable of $225,000 (due 2016) will be settled with a note for $53,000 and 12,000 shares of the stock contributed by the owners. |
| %u2022 |
Note payable of $215,000 (due 2014) will be settled with a note for $74,000 and 9,000 shares of the stock contributed by the owners. |
| %u2022 |
Note payable of $185,000 (due 2015) will be settled with a note for $113,000. |
| The company has a reorganization value of $754,000. |
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Prepare all journal entries for Ristoni so that the company can emerge from the bankruptcy proceeding. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) |