Holmes Corporation files a voluntary petition with the bankruptcy court in hopes of reorganizing. Company officials prepare a statement of financial affairs showing these debts:

Liabilities with priority:

Salaries payable

$$18,000$

Fully secured creditors:

Notes payable $($secured by land and buildings valued at $$84,000)$

$70,000$

Partially secured creditors:

Notes payable $($secured by inventory valued at $$30,000)$

$140,000$

Unsecured creditors:

Notes payable

$50,000$

Accounts payable

$10,000$

Accrued expenses

$4,000$

Holmes has $10,000$ shares of common stock outstanding with a par value of $$5$ per share. In addition, the company currently reports a deficit balance of $$132,000.$

In hopes of emerging from Chapter $11$ bankruptcy, officials propose the following reorganization plan:

The company$$s assets have a total book value of $$210,000,$ an amount considered to be equal to fair value. The reorganization value of business assets as a whole is set at $$225,000.$

Employees will receive a one$-$year note in lieu of all salaries owed. Interest will be paid at a $10$ percent annual rate, a normal rate for this type of liability.

Future interest on the fully secured note will drop from a $15$ percent annual rate, which is now unrealistic, to a $10$ percent rate.

The company will issue a new six$-$year $$30,000$ note paying $10$ percent annual interest to replace the partially secured note payable. In addition, this creditor will receive $5,000$ new shares of Holmes$$s common stock.

An outside investor will buy $6,000$ new shares of common stock at $$6$ per share.

The unsecured creditors will receive an offer of $20$ cents on the dollar to settle the remaining liabilities.

Assume that all interested parties accept this plan of reorganization and it becomes effective. What journal entries will Holmes Corporation record?