The following account balances are available from the ledger of Yutao Shui Corporation on December 31, 2016:
Common Shares (20,000 shares authorized and outstanding) .................. $1,000,000
Retained Earnings (Deficit) ........................................................... (190,000)
On January 2, 2017, the corporation put into effect a shareholder-approved reorganization by agreeing to pass the common shares over to the creditors in full payment of the $260,000 Notes Payable, writing up Buildings by $135,600, and eliminating the deficit. Assume that Yutao Shui follows ASPE.
Instructions
Prepare the required journal entries for the financial reorganization of Yutao Shui Corporation.