The Larisa Company is exiting bankruptcy reorganization with the following accounts:

	Book Value			Fair Value
Receivables	$	87,000		$	104,000
Inventory		207,000			224,000
Buildings		307,000			414,000
Liabilities		307,000			307,000
Common stock		337,000
Additional paid-in capital		34,000
Retained earnings (deficit)		(77,000	)

The company's assets have a $787,000 reorganization value. As part of the reorganization, the company's owners transferred 70 percent of the outstanding stock to the creditors.

Prepare the journal entry (or entries) necessary to adjust the companys records to fresh start accounting

1) Record the entry to adjust asset values to fair value.

2) Record the entry to reduce additional paid in capital balance to correct figure, to close out gain account, and to eliminate deficit.