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, 2021, Champion Chemical Corporation’s balance sheet appeared as follows (in condensed form):
Required:
1. Prepare the journal entries appropriate to record the quasi reorganization on January 1, 2022.
2. Prepare a balance sheet as it would appear immediately after the restatement.
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