St. John Corporation is barely solvent and has been seeking an equity investor that would be interested in making a capital contribution so that the company would hopefully return to performance levels it had experienced in the past. The company’s year-end 2015 balance sheet is presented below.
Selected transactions occurring during the first six months of 2016 were as follows:
a. Patents with a fair value of $230,000 were transferred to the officer in partial satisfaction of their note. The remaining balance on the note would be paid over five quarters with the first payment of $35,026.77 due on June 30, 2016.
b. The mortgage payable was restructured with 40 quarterly payments of $51,178.05, beginning on June 30, 2016, in addition to an immediate lump sum payment of $100,000.
c. The bank A note payable was restructured as follows: the development land with a net realizable value of $980,000 was conveyed along with marketable securities having a book value of $80,000 and a market value of $95,000. The balance of the note was to be over 10 quarters with payments of $111,145.03 beginning on June 30, 2016.
d. The bank B note payable was partially secured by equipment which had a book value of $240,000 and a net realizable value of $220,000. The equipment was seized by the bank and the company agreed to settle the balance of the note by making 10 quarterly payments of $55,000 beginning on June 30, 2016.
e. On June 30, 2016 all payments required by item (a) through (d) above were paid.
f. Common shareholders approved a reduction in par value from $10 per share to $5 per share and the deficit was eliminated.
Prepare all necessary entries to record the above transactions (a) through (f).

  • CreatedApril 13, 2015
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