PROBLEMS P18-1 Balance sheet for fresh-start reporting evaluation] Tessa Ltd. which operated under Chapter 11 of the bankruptcy act, released its balance sheet when they submited their reorganization plan as follows (in thousands): August 1, 2014 Cash and equivalents Accounts receivable Inventories Land $ 275 200 250 300 350 300 Buildings - net Equipment - net Total assets $ 1,675 Liabilities subject to compromise Accounts payable Wages payable Bond payable Interest payable Total liabilities $1,500 200 100 400 100 $2.300 $ 900 (1,525) $ 1,675 Common stock Deficit Total equity Tessa's reorganization plan is as follows: 1. Bondholders agree to accept $200,000 of new common stock, $150,000 of senior debt of 12% bonds, and $50,000 cash payable at December 31, 2014. 2. Priority tax claims of $100,000 willl be paid after reorganization plan is confirmed. 3. Accounts payable will be settled using $200,000 of new common stock and $300,000 of subordinate debts. 4. Current accrued interest payable on bonds is forgiven. 5. Equity holders will exchange their stock with $250,000 of new common stock REQUIRED: Show calculations and determine whether Tessa is confirmed for a fresh-start reporting. PROBLEMS P18-1 Balance sheet for fresh-start reporting evaluation] Tessa Ltd. which operated under Chapter 11 of the bankruptcy act, released its balance sheet when they submited their reorganization plan as follows (in thousands): August 1, 2014 Cash and equivalents Accounts receivable Inventories Land $ 275 200 250 300 350 300 Buildings - net Equipment - net Total assets $ 1,675 Liabilities subject to compromise Accounts payable Wages payable Bond payable Interest payable Total liabilities $1,500 200 100 400 100 $2.300 $ 900 (1,525) $ 1,675 Common stock Deficit Total equity Tessa's reorganization plan is as follows: 1. Bondholders agree to accept $200,000 of new common stock, $150,000 of senior debt of 12% bonds, and $50,000 cash payable at December 31, 2014. 2. Priority tax claims of $100,000 willl be paid after reorganization plan is confirmed. 3. Accounts payable will be settled using $200,000 of new common stock and $300,000 of subordinate debts. 4. Current accrued interest payable on bonds is forgiven. 5. Equity holders will exchange their stock with $250,000 of new common stock REQUIRED: Show calculations and determine whether Tessa is confirmed for a fresh-start reporting