Carrol, Inc., accomplished a quasi-reorganization effective December 31, 2008. Immediately prior to the quasi-reorganization, the stockholders' equity was as follows:

Under the terms of the quasi-reorganization, the par value of the common stock was reduced from $10 per share to $5 per share and equipment was written down by $1.2 million.
Required:
Discuss the accounting treatment necessary to accomplish this quasi¬ reorganization.

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Common stock, par value $10 per share authorized issued and outstanding 400,000 shares Additional paid-in capital Retained earnings (deficit) $4,000,000 600,000 (900,000)