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The condensed balance sheets of Pronghorn Limited, a small private company that follows ASPE, follow for the periods immediately before, and one year after, it

The condensed balance sheets of Pronghorn Limited, a small private company that follows ASPE, follow for the periods immediately before, and one year after, it had completed a financial reorganization: image text in transcribed

For the year following the financial reorganization, the company reported net income of $208,000 and depreciation expense of $60,000, and paid a cash dividend of $28,000. As part of the reorganization, the company wrote down inventory by $120,000 in order to reflect circumstances that existed before the reorganization. Also, the deficit, and any revaluation adjustment, was accounted for by charging amounts against contributed surplus until it was eliminated, with any remaining amount being charged against common shares. The common shares are widely held and there is no controlling interest. No purchases or sales of plant assets and no share transactions occurred in the year following the reorganization. Prepare all the journal entries made at the time of the reorganization.

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Before Reorganization $450,000 2,000,000 One Year After $570,000 1,160,000 Current assets Buildings (net) Before One Year Reorganization After Common shares $2,850,000 $1,550,000 Contributed surplus 210,000 (Deficit) retained earnings (610,000) 180,000 $2,450,000 $1,730,000 $2,450,000 $1,730,000 Account Titles and Explanation Debit Credit (To record impairment of assets that existed before reorganization) (To eliminate deficit)

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