During the recent recession, Polydorous Inc. accumulated a deficit in retained earnings. Although still operating at a loss, the company posted better results during 20X1. Polydorous is having trouble paying suppliers on time and is paying interest when it is due. The company files for protection under Chapter 11 of the Bankruptcy Code and has the following liabilities and stockholders equity accounts at the time the petition is filed:

Accounts Payable	$	160,200
Interest Payable		21,600
Notes Payable, 10%, unsecured		341,600
Preferred Stock		101,100
Common Stock, $5 par		150,500
Retained Earnings (deficit)		(80,600	)
Total	$	694,400

A plan of reorganization is filed with the court, which approves it after review and obtaining creditor and investor votes. The plan of reorganization includes the following actions:

1.	The prepetition accounts payable will be restructured according to the following: (a) $40,100 will be paid in cash, (b) $21,800 will be eliminated, and (c) the remaining $98,300 will be exchanged for a four-year, secured note payable paying 13 percent interest.
2.	The interest payable will be restructured as follows: elimination of $10,800 of the interest and payment of the remaining $10,800 in cash.
3.	The 10 percent, unsecured notes payable will be restructured as follows: (a) $61,300 of them will be eliminated, (b) $10,800 of them will be paid in cash, (c) $243,300 of them will be exchanged for a 4-year, 13 percent secured note, and (d) the remaining $26,200 will be exchanged for 2,620 shares of newly issued common stock having a par value of $10.
4.	The preferred shareholders will exchange their stock for 5,100 shares of newly issued $10 par common stock.
5.	The common shareholders will exchange their stock for 2,010 shares of newly issued $10 par common stock.

After extensive analysis, the companys reorganization value is determined to be $512,000 prior to any payments of cash required by the reorganization plan. An additional $11,400 in current liabilities have been incurred since the petition was filed. After the reorganization is completed, the capital structure of the company will be as follows:

Current liabilities (postpetition)	$	11,400
Notes payable, 13%, secured		341,600
Common stock ($10 par)		97,300
Postreorganization capital structure	$	450,300

An evaluation of the assets fair values was made after the company completed its reorganization, immediately prior to the point the company emerged from the proceedings. The following information is available:

	Book Value			Fair Value
Cash	$	30,400		$	30,400
Accounts receivable (net)		140,500			111,900
Inventory		26,300			18,700
Property, plant & equipment (net)		446,900			263,000
Total	$	644,100		$	424,000

Required:

a.

Prepare a plan of reorganization recovery analysis for the liability and stockholders equity accounts of Polydorous Inc. on the day the plan of reorganization is approved. (Hint: The liabilities on the plans approval day are $534,800, which is $523,400 from prepetition payables plus $11,400 in additional accounts payable incurred postpetition.) (Negative amounts should be indicated by a minus sign.)

b.	Prepare an analysis showing whether the company qualifies for fresh start accounting as it emerges from the reorganization based on the reorganization value of its assets and postpetition liabilities & allowed claims.

c.	Prepare journal entries for execution of the plan of reorganization with its general restructuring of debt and capital. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)