Quasi-Reorganization
The Hassani Corporation has the following balance sheet:

Current assets	$ 700,000	Current liabilities	$ 600,000
Noncurrent assets	3,600,000	Long-term liabilities	2,950,000
		Common stock ($10 par)	1,700,000
		Retained earnings	(950,000)
Total assets	$4,300,000	Total liabilities and equity	$4,300,000

Company profitability has been marginal, in part due to book valuesof noncurrent assets that do not adequately reflect the reducedearning power of the assets. To give its balance sheet a betterbasis for future profitability, the company decides to undertake aquasi-reorganization. Hassani writes down noncurrent assets totheir fair value of $3,000,000 and replaces the current commonstock with 100,000 shares of a new issue having a $1 parvalue.

Required

a. Prepare journal entries to record thequasi-reorganization.

General Journal
Description	Debit	Credit
Retained earningsCommon stockNoncurrent assetsAdditionalpaid-in capital
Retained earningsCommon stockNoncurrent assetsAdditionalpaid-in capital
To write down assets to fair value.
Retained earningsCommon stock ($10 par)NoncurrentassetsAdditional paid-in capital
Common stock ($1 par)
Retained earningsCommon stockNoncurrent assetsAdditionalpaid-in capital
To restructure common stock equity.
Retained earningsCommon stockNoncurrent assetsAdditionalpaid-in capital
Retained earningsCommon stockNoncurrent assetsAdditionalpaid-in capital
To eliminate deficit.

b. Prepare a balance sheet following the quasi-reorganization.

Hassani Corporation Balance Sheet
Current assets	$
Noncurrent assets
	$
Current liabilities	$
Long-term liabilities
Common stock ($1 par)
Additional paid-in capital
Retained earnings since (date)
	$  Â