Total Postpetition Liabilities (total debt after the petition) reorganization was $150,000

Prepetition liabilities (debt before the request for reorganization): Accounts payable $ 300,000 Taxes payable $ 80,000 Interest payable $ 45,000 Bank Loan $ 500,000 Capital stock $ 600,000

The following is the reorganization plan:

1. The bank agrees to accept common stock of $200,000 and Senior debt of $180,000

2. Tax payable is paid immediately

3. Interest payable is eliminated

4. Creditors (Accounts payable) agree to accept common stock of $ 100,000 and senior debt of $ 90,000 5. Shareholders will exchange their shares for $100,000 of common stock.

Requested:

1. Calculate the reorganization value!

2. Calculate the gain on debt discharge & make a debt settlement journal before the application (prepetition claim) and exchange of shares by shareholders