Problem
Blue Spruce Corporation went through a financial reorganization by writing down its buildings by $102,000 and eliminating its deficit, which was $171,000 before the reorganization. As part of the reorganization, the creditors agreed to take back 56% of the common shares in lieu of payment of the debt of $1.98 million (notes payable).
Using the three-step method, prepare the entries to record the financial reorganization assuming that Blue Spruce follows ASPE.