Holmes Corporation has filed a voluntary petition with the bankruptcy court in hopes of reorganizing. A statement of financial affairs has been prepared for the company showing these debts:

Holmes Corporation has led a voluntary petition with the bankruptcy court in hopes of reorganizing. A statement of nancial affairs has been prepared for the company showing these debts: Liabilities with priority: Salaries payable $ 35.000 Fully secured creditors: Notes payable {secured by land and buildings valued at $101,000) 120,000 Partially secured creditors: Notes payable {secured by inventory valued at $47,000) 157,000 Unsecured creditors: Notes payable 3?,000 Accounts payable 27,000 Accrued expenses 8,000 Holmes has 15,000 shares of common stock outstanding with a par value of $9 per share. In addition. it is currently reporting a decit balance of $99,000. Company ofcials have proposed the following reorganization plan; The company's assets have a total book value of $450,000, an amount considered to be equai to fair value. The reorganization value of the assets as a whoie, though, is set at $525,000. Employees will receive a one-year note in lieu of all salaries owed. Interest will be 9 percent, a normal rate for this type of liability. The fully secured note will have all future interest dropped from a 14 percent rate, which is now unrealistic, to a 9 percent rate. The partially secured note payable will be satised by signing a new 6-year $47,000 note paying 9 percent annual interest. In addition. this creditor will receive 8.000 new shares of Holmes's common stock. An outside investor has been enlisted to buy 9,000 new shares of common stock at $10 per share. The unsecured creditors will be offered 30 cents on the dollar to settle the remaining liabilities. If this plan of reorganization is accepted and becomes effective, what journal entries would Hoimes Corporation record? (If no entry is required for a transactionlevent, select "No journal entry required" in the first account eld. Do not round intermediate calculations.) View transaction list View journal entry worksheet No Transaction General Journal Debit Credit 1' 1 1 ' ' Additional paid-in capital 75.000 Note payable1 year Notes payable Cash Additional paid-in capital 5 5 Notes payable 67.000 Accrued expenses Cash Gain on discharge of debt 6 s Gain on discharge of debt 99-000