A company with a $2,000,000 deficit undertakes a quasi-reorganization on November 1,2010.Certain assets will be written down by $400,000 to their present fair market value.Liabilities will remain the same.Capital stock was $3,000,000 and additional paid-in capital was $1,000,000 before the quasi-reorganization.How would the entries to accomplish these changes on November 1,2010,affect each of the following? Capital Stock Total Stockholders' Equity

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The quasi-reorganization has no effect on the capital stock, so there is no entry to be made. The deficit of $2,000,000 is reduced by the write-down of assets, so total stockholders' equity increases. Therefore, the entry to accomplish these changes would be a debit to accumulated deficit for $1,600,000 ($2,000,000 - $400,000) and a credit to the assets that were written down for $400,000. This results in an overall increase of $1,200,000 to total stockholders' equity.

A Company with a $2,000,000 Deficit Undertakes a Quasi-Reorganization on November