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Quasi reorganization 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

Quasi reorganization

 

 

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.

Jun 19 2020 Read more Less More

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