Prepare the journal entries for the financial reorganization

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Loyalty 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) $280,000

Retained Earnings (Deficit) (160,000)

Point 1: On January 2, 2021, the company's shareholders agreed to a financial reorganization whereby there was a transfer ownership of the shares to the creditors in full payment of the $225,000 notes payable. At the time the building was on the books at $320,000 and it was determined that the market value was $410,000. Equipment was on the books at $125,000 but the appraised value was $85,000.

Required:

Question 1: Prepare the journal entries for the financial reorganization of Loyalty Contractors.

Reference no: EM132484491

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