Reference no: EM132652158
Question - Develop the quasi-organization plan to present to the shareholders, making an appropriate adjustment to the capital structure as necessary but without a stockholder assessment?
Davis Corporation has incurred losses from operations for several years. At the recommendation of the newly hired president, the board of directors voted to implement a quasi-reorganization, subject to stockholder approval. Immediately prior to the restatement, on June 30, Davis's balance sheet was as follows:
Current assets 550,000
Property, plant, and equipment (net) 1,350,000
Other assets 200,000
= $2,100,000
Total liabilities 600,000
Common stock ($10 par, 160,000 shares) 1,600,000
Additional paid-in capital 300,000
Retained earnings (deficit) (400,000)
= $2,100,000
The stockholders approved the quasi-reorganization effective July 1. It was determined that Other Assets had a fair value of $50,000 and Property, Plant, and Equipment (net) a fair value of $1,000,000.