Baltimore Company Is Emerging from Chapter 11 Reorganization Additional Information:
1) Liabilities Subject to Compromise Consist of a Sheet

Baltimore Company is emerging from Chapter 11 reorganization. Its balance sheet at the end of the reorganization period is as follows:
$$\begin{array} { | l | r | l | r | } \hline \text { Assets } & & \text { Liabilities and equity } & \\\hline \text { Current assets } & \$ 200,000 & \text { Current liabilities (postpetition) } & \$ 300,000 \\\hline \text { Property and equipment } & 3,600,000 & \text { Liabilities subject to compromise } & 3,900,000 \\\hline & & \text { Common stock } & 100,000 \\\hline & & \text { Retained earnings } & \underline { ( 500,000 ) } \\\hline \text { Total assets } & \$ 3,800,000 & \text { Total liabilities and equity } & \$ \$ \$ 3,800,000 \\\hline\end{array}$$ Additional information:
1) Liabilities subject to compromise consist of a $1,500,000 loan payable and a $2,400,000 note payable.
2) Reorganization value is $2,800,000.
3) As part of the reorganization plan, the loan is exchanged for a new loan in the amount of $820,000 plus 35% of the new stock issued. The note is exchanged for a new note in the amount of $1,600,000 plus 35% of the new stock issued. The existing common stock is canceled; the old shareholders receive 30 percent of the new stock.
4) Fair values of reported assets are: current assets, $150,000; property and equipment, $2,050,000. In addition, there are previously unreported identifiable intangible assets valued at $100,000.
Required
a. Explain why this reorganization qualifies for fresh start reporting.
b. Calculate the total value of the new common stock.
c. Prepare journal entries to record the reorganization plan.
d. Present Baltimore Company's balance sheet immediately following emergence from reorganization.