Carrol, Inc. accomplished a quasi-reorganization effective December 31, 2011. Immediately before the

Carrol, Inc. accomplished a quasi-reorganization effective December 31, 2011. Immediately before the quasi-reorganization, the stockholders equity was as follows: Common stock, par value $10 per share authorized issued and outstanding 400,000 shares …………………………………………………… $4,000,000 Additional paid-in capital ………………………….. 600,000 Retained earnings (deficit) ……………………….. (900,000) Under the terms of the quasi-reorganization, the par value of the common stock was reduced from $10 per share to $5 per share and equipment was written down by $1.2 million. Required: Discuss the accounting treatment necessary to accomplish this quasi-reorganization.

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