The balance sheet of Natathon International is provided below. (Bankruptcy and protecting the interests ofthe creditors) Assets Liabilities and Stockholders* Equity Current assets $200,000 Liabilities $400,000 Fixed assets 500,000 Common stock 150,000 Additional paid-in capital 50,000 _ Retained earnings 100,000 Total liabilities and Total assets $700,000 stockholders’ equity $700,000 Although the balance sheet appears reasonably healthy, Natathon is on the verge of ceas¬ ing operations. Appraisers have estimated that, while current assets are worth $200,000, the fixed assets of the company can be sold for only $450,000. There are 1,000 outstanding shares of common stock owned by ten stockholders, each with a 10 percent interest (i.e., 100 shares). Before ceasing operations, the board of directors, which is comprised primarily of the major stockholders, is considering several alternative courses of action. 1. Liquidate the assets, declare a $250 per-share dividend, and distribute the remaining assets to the creditors. 2. Liquidate the assets, declare a $400 per-share dividend, and distribute the remaining assets to the creditors. 3. Liquidate the assets, purchase the outstanding shares for $250 each, and distribute the remaining assets to the creditors. 4. Liquidate the assets, and purchase the outstanding shares for $650 each. REQUIRED:

a. Prepare the journal entry to reflect the write-down of the fixed assets.

b. Prepare the journal entry to accompany each of the alternative courses of action.

c. Comment on the legality of each of the board’s proposals, and explain how the assets should be distributed after liquidation