A company emerging from Chapter 11 reorganization has the following balance sheet:

Cash $ 25,000

Accounts receivable 60,000

Inventories 400,000

Plant and equipment, net 1,200,000

Total $1,685,000

Postpetition liabilities $ 200,000

Liabilities subject to compromise 1,500,000

Common stock 300,000

Retained deficit (315,000)

Total $1,685,000

The plan of reorganization provides for the following:

• *Estimated reorganization value is $1,300,000.
• *Liabilities subject to compromise are replaced with $1,000,000 in notes payable and 80% of the new common stock issue.
• *Existing shareholders receive 20% of the new stock issue
• *Inventories and plant and equipment are written down to their fair values of $250,000 and $800,000, respectively.
• *There are no previously unreported identifiable intangible assets.

In the entry to record revaluation of assets, the loss on asset revaluation is:

A. $ 385,000

B. $1,050,000

C. $ 875,000

D. $ 550,000