Becket Corporation’s accountant has prepared the following balance sheet as of November 10, 2024, the date on which the company is to release a plan for reorganizing operations under Chapter 11 of the Bankruptcy Reform Act:

The company has presented the following proposal:

∙ Accounts receivable of $20,000 are written off as uncollectible. Investments are worth $40,000, land is worth $80,000, the buildings are worth $300,000, and the equipment is worth $86,000.

∙ An outside investor has been found who will buy 7,000 shares of common stock at $11 per share.

∙ The company’s investments are to be sold for $40,000 in cash with the proceeds going to the holders of the current note payable. The remainder of these short-term notes will be converted into notes payable with a face value of $130,000 that comes due in 2028. The note pays 10 percent annual cash interest.

∙ All accounts payable will be exchanged for $40,000 in notes payable due in 2025 that pay 8 percent annual cash interest.

∙ Title to land costing $20,000 but worth $50,000 will be transferred to the holders of the note payable due in 2027. These creditors will also receive $180,000 in notes payable (paying 10 percent annual interest) coming due in 2031. These creditors will also receive 3,000 shares of previously unissued common stock. Becket retains the remainder of its land.

∙ The reorganization value of the company’s assets prior to issuing additional shares, selling the company’s investments, and conveying title to the land is set at $650,000 based on discounted future cash flows.

Prepare journal entries for Becket to record the transactions put forth in this reorganization plan.

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Cash.... Accounts receivable (net). .... Investments....... Inventory (net realizable value is expected to approximate 80% of cost). Land...... Buildings (net).. Equipment (net) BECKET CORPORATION Balance Sheet November 10, 2024 Assets Total assets. Liabilities and Equities Accounts payable..... Notes payable-current (secured by equipment) Notes payable-(due in 2027) (secured by land and buildings). Common stock ($10 par value). Retained earnings (deficit) .... Total liabilities and equities $ 12,000 61,000 26,000 80,000 57,000 248,000 117,000 $ 601,000 $ 129,000 220,000 325,000 60,000 (133,000) $ 601,000