Record a quasi-reorganization. The stockholders of Vegas Corporation have authorized the company to conduct a quasi-reorganization in order to revise asset valuations and eliminate its deficit. A condensed balance sheet at October 1, 20X5, just prior to the uasire organization, is as follows:
|
Assets |
Liabilities and Equity |
||
|
Current assets |
$ 400,000 |
Liabilities |
$ 600,000 |
|
Property and equipment |
Capital stock ($10 par) |
2,200,000 |
|
|
(net) |
2,000,000 |
Deficit |
(400,000) |
|
Total assets |
$2,400,000 |
Total liabilities |
|
|
and equity |
$2,400,000 |
||
a. Inventories have been overvalued by $80,000.
b. Plant assets have been appraised at $1,500,000.
c. Stockholders have approved a reduction in the par value of capital stock to $5 per share.
1. Prepare journal entries to record the quasi-reorganization.
2. Prepare a balance sheet for immediately after the quasi-reorganization.