Nouveau Corporation Is Emerging from Reorganization Proceedings Under Chapter 11

Nouveau Corporation is emerging from reorganization proceedings under Chapter 11 of the bankruptcy laws. The company's balance sheet is as follows:
$$\begin{array}{l}\begin{array} { | l | r | } \hline \text { Cash } & \$ 300,000 \\\hline \text { Accounts receivable } & 800,000 \\\hline \text { Inventories } & 2,000,000 \\\hline \text { Plant and equipment, net } & 10,000,000 \\\hline \text { Total assets } & \$ 13,100,000 \\\hline & \\\hline \text { Postpetition liabilities } & \$ 400,000 \\\hline \text { Liabilities subject to compromise } & 14,100,000 \\\hline \text { Common stock } & 100,000 \\\hline \text { Retained earnings } & ( 1,500,000 ) \\\hline \text { Total liabilities and equity } & \$ 13,100,000 \\\hline\end{array}\\\\\text { Nouveau's reorganization value is calculated as follows: }\\\\\begin{array} { | l | r | } \hline \text { Excess cash } & \$ 200,000 \\\hline \text { Present value of future operating cash flows of emerging entity } & 10,300,000 \\\hline \text { Total } & \$ 10,500,000 \\\hline\end{array}\end{array}$$ Creditors represented by the liabilities subject to compromise will receive an immediate cash payment of $200,000, new long-term debt securities of $9,850,000, and 70% of the new common stock. The old shareholders will receive 30% of the new common stock. The market value of the receivables is $700,000, the market value of the inventories is $1,500,000 and the market value of the plant and equipment is $8,000,000. There are no previously unreported identifiable intangible assets.
Required
a. Show why this reorganization plan meets the fresh start reporting criteria.
b. Calculate the total value of the new common stock.
c. Prepare the journal entries to record the restructuring.
d. Present the balance sheet of the new organization immediately after the reorganization.