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The Larisa Company is exiting bankruptcy reorganization with the following accounts: Book Value Fair Value Receivables $ 80,000 $ 90,000 Inventory 200,000 210,000 Buildings 300,000

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

Book Value Fair Value
Receivables $ 80,000 $ 90,000
Inventory 200,000 210,000
Buildings 300,000 400,000
Liabilities 300,000 300,000
Common stock 330,000
Additional paid-in capital 20,000
Retained earnings (deficit) (70,000 )

The company's assets have a $760,000 reorganization value. As part of the reorganization, the company's owners transferred 80 percent of the outstanding stock to the creditors.

Prepare the journal entry (or entries) necessary to adjust the companys records to fresh start accounting. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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.

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