Acc421 Intermediate Accounting P18-13 Champion Chemical Corporation (Quasi reorganization)

Acc421 Intermediate Accounting

P 18–13 Quasi reorganization (based on Appendix 18)
A new CEO was hired to revive the floundering Champion Chemical Corporation. The company had endured operating losses for several years, but confidence was emerging that better times were ahead. The board of directors and shareholders approved a quasi reorganization for the corporation. The reorganization included devaluing inventory for obsolescence by $105 million and increasing land by $5 million. Immediately prior to the restatement, at December 31, 2011, Champion Chemical Corporation’s balance sheet appeared as follows (in condensed form):
CHAMPION CHEMICAL CORPORATION
Balance Sheet
At December 31, 2009
($ in millions)
Cash $ 20
Receivables 40
Inventory 230
Land 40
Buildings and equipment (net) 90
$420

Liabilities $240
Common stock (320 million shares at $1 par) 320
Additional paid-in capital 60
Retained earnings (deficit) (200)
$420

Required:
1. Prepare the journal entries appropriate to record the quasi reorganization on January 1, 2012.
2. Prepare a balance sheet as it would appear immediately after the restatement.
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