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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 $ 275

Inventories $200

Land $250

Buildings - net $350

Equipment - net $300

Total assets $1,675

Liabilities subject to compromise $1500

Accounts payable $200 Wages payable $100 Bond payable $400

Interest payable $100

Total liabilities $2,300

Common stock $900

Deficit ($1,525) Total equity $1,675

Tessas 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 will be paid after reorganization plan is confirmed.

3. Accountspayablewillbesettledusing$200,000ofnewcommonstockand$300,000ofsubordinatedebts.

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.

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): Cash and equivalents Accounts receivable Inventories Land Buildings - net Equipment - net Total assets August 1, 2014 $ 275 200 250 300 350 300 $ 1,675 Liabilities subject to compromise Accounts payable Wages payable Bond payable Interest payable Total liabilities $ 1,500 200 100 400 100 $ 2,300 Common stock Deficit Total equity $ 900 (1,525) $ 1,675 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 will 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. 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): Cash and equivalents Accounts receivable Inventories Land Buildings - net Equipment - net Total assets August 1, 2014 $ 275 200 250 300 350 300 $ 1,675 Liabilities subject to compromise Accounts payable Wages payable Bond payable Interest payable Total liabilities $ 1,500 200 100 400 100 $ 2,300 Common stock Deficit Total equity $ 900 (1,525) $ 1,675 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 will 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

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