A New CEO Was Hired to Revive the Floundering Heirloom

Essay

A new CEO was hired to revive the floundering Heirloom Watch 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 $210 million and increasing land by $10 million. Immediately before the restatement, at December 31, 2018, Heirloom Watch 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, 2019.
2. Prepare a balance sheet as it would appear immediately after the restatement.