Esperer Company is emerging from Chapter 11 reorganization and qualifies for fresh start reporting. Information on the reorganization is as follows:
1) Postpetition liabilities are $500,000.
2) The liabilities subject to compromise are replaced with $4,000,000 in notes payable and 75% of the new common stock issued.
3) Reorganization value is $5,000,000. Fair value of previously reported identifiable assets are current assets, $250,000 and buildings and equipment, $3,650,000. Previously unreported intangible assets have a fair value of $200,000.
4) The gain on discharge of debt is $1,625,000.
5) The old common stock account had a balance of $600,000.
6) Current assets were written down by $50,000, and buildings and equipment were written down by $2,350,000.
Required
a. Prepare Esperer's balance sheet immediately following reorganization.
b. Reconstruct the journal entries to record the reorganization plan.

Question

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The Answer of Esperer Company is emerging from Chapter 11 reorganization and qualifies for fresh start reporting. Information on the reorganization is as follows:
1) Postpetition liabilities are $500,000.
2) The liabilities subject to compromise are replaced with $4,000,000 in notes payable and 75% of the new common stock issued.
3) Reorganization value is $5,000,000. Fair value of previously reported identifiable assets are current assets, $250,000 and buildings and equipment, $3,650,000. Previously unreported intangible assets have a fair value of $200,000.
4) The gain on discharge of debt is $1,625,000.
5) The old common stock account had a balance of $600,000.
6) Current assets were written down by $50,000, and buildings and equipment were written down by $2,350,000.
Required
a. Prepare Esperer's balance sheet immediately following reorganization.
b. Reconstruct the journal entries to record the reorganization plan.

Esperer Company Is Emerging from Chapter 11 Reorganization and Qualifies