Question

Ristoni Company is in the process of emerging from a Chapter 11 bankruptcy. It will apply fresh start accounting as of December 31, 2010. The company currently has 30,000 shares of common stock outstanding with a $240,000 par value. As part of the reorganization, the owners will contribute 18,000 shares of this stock back to the company. A retained earnings deficit balance of $330,000 exists at the time of this reorganization.
The company has the following asset accounts:


The company’s liabilities will be settled as follows. Assume that all notes will be issued at reasonable interest rates.
• Accounts payable of $80,000 will be settled with a note for $5,000. These creditors will also get 1,000 shares of the stock contributed by the owners.
• Accrued expenses of $35,000 will be settled with a note for $4,000.
• Note payable of $100,000 (due 2014) was fully secured and has not been renegotiated.
• Note payable of $200,000 (due 2013) will be settled with a note for $50,000 and 10,000 shares of the stock contributed by the owners.
• Note payable of $185,000 (due 2011) will be settled with a note for $71,000 and 7,000 shares of the stock contributed by the owners.
• Note payable of $200,000 (due 2012) will be settled with a note for $110,000.
The company has a reorganization value of $780,000.
Prepare all journal entries for Ristoni so that the company can emerge from the bankruptcyproceeding.


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  • CreatedOctober 04, 2014
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