Mighty Contractors has been experiencing financial difficulties since start up. The following are the ledger balances on December 31, 2020:

Common shares (40,000 shares authorized and outstanding)$560,000

Retained Earnings (Deficit)(320,000)

On January 2, 2021, the company's shareholders agreed to a financial reorganization whereby there was atransfer ownership of the shares to the creditors in full payment of the $450,000 notes payable.At the time the building was on the books at $275,000 and it was determined that the market value was $380,000. Equipment was on the books at $85,000 but the appraised value was $65,000.

Required:

Prepare the journal entries for the financial reorganization of Mighty Contractors.