Becket Corporations accountant has prepared the following balance sheet as of November 10, 2010, the date on

Question:

Becket Corporation’s accountant has prepared the following as of November 10, 2010, the date on which the company is to release a plan for reorganizing operations under Chapter 11 of the Bankruptcy Reform Act:

The company presented the following proposal:
• The reorganization value of the company’s assets just prior to issuing additional shares below, selling the company’s investment, and conveying title to the land is set at $650,000.
• of $20,000 are written off as uncollectible. Investments are worth $40,000, land is worth $80,000, the buildings are worth $300,000, and the equipment is worth $86,000.
• An outside investor has been found to buy 7,000 shares of at $11 per share.
The company’s investments are to be sold for $40,000 in cash with the proceeds going to the holders of the current note payable. The remainder of these short-term notes will be converted into $130,000 of notes due in 2014 and paying 10 percent annual cash interest.
• All will be exchanged for $40,000 in notes payable due in 2011 that pay 8 percent annual interest.
• Title to land costing $20,000 but worth $50,000 will be transferred to the holders of the note payable due in 2013. In addition, these creditors will receive $180,000 in notes payable (paying 10 percent annual interest) coming due in 2017. These creditors also are issued 3,000 shares of previously unissued .
Prepare journal entries for Becket to record the transactions as put forth in this reorganization plan.

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