Green has been operating under Chapter 11 of the Bankruptcy Code for the past 17 months. On May 31, 2020, just before confirmation of its reorganization plan, Greens reorganization value is estimated at $4,000,000. A balance sheet for Green prepared on the same date is summarized as follows:

Current assets $1,250,000

Plant assets 3,500,000

4,750,000

Postpetition liabilities $1,500,000

Prepetition liabilities subject to compromise* 2,000,000

Fully secured debt 1,100,000

Capital stock 1,000,000

Deficit (850,000)

4,750,000

*Represents allowed claims. The reorganization plan calls for payment of $175,000 and issuance of $625,000 notes and $500,000 common stock in settlement of the prepetition liabilities.

Required:

1. Does Green qualify for fresh-start reporting on the basis of the reorganization value? Show calculations.
2. To qualify for fresh start reporting, the old stockholders must retain less than a 50% interest in the new entity. Does Green meet this Ownership Test to qualify for fresh-start reporting? Show calculations.