The balance sheet for the LR Corporation is present below.The only asset on the balance sheet which is in excess of fair market value is inventory, which has a fair market value of $60,000.LR is planning to undertake a quasi-reorganization.

a.Explain why a company in LR's position may want to undertake a quasi-reorganization.

b. What steps are involved in a quasi-reorganization?

c. Present the necessary journal entries.

Cash 30,000 Receivables 55,000 Inventory 70,000 PP&E (net) 175,000 330,000 Liabilities 150,000 Common stock 100,000 Additional paid in capital 220,000 Retained earnings (140,000) 330,000