A New CEO Was Hired to Revive the Floundering Heirloom

question 103

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.

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Definitions:

Phospholipids

Phospholipids are a class of lipids that are a major component of all cell membranes; they form bilayers due to their hydrophilic heads and hydrophobic tails.

Hydrophobic Region

Part of a molecule that is repellent to water, often found in lipids and integral membrane proteins.

Hydrophilic Region

Describes a part of a molecule or structure that is attracted to water and tends to interact well with it.

Hydrogen Bond

A weak bond between two molecules resulting from an electrostatic attraction between a proton in one molecule and an electronegative atom in the other.