Detailed Answer
(c) A quasi reorganization generally involves
(1) revaluing assets, (2) reducing par, and (3) writing the deficit
off against additional paid-in capital. In this case, no mention is
made of the first step, revaluing assets. The second step, reducing
par, results in a decrease to common stock and an increase to
additional paid-in capital of $250,000 [10,000 × ($30 – $5)].
The third step, writing off the deficit, increases retained earnings
by $210,000 (creating a $0 balance) and decrease additional
paid-in capital by the same amount. Immediately after
the quasi reorganization, Brown should report additional paid-in
capital of $190,000 ($150,000 + $250,000 – $210,000).