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Friends Help Each Other is a song for Daniel Tiger's Neighborhood. There are two lines:

And when I spilled the tea I didn't know what to do But then we cleaned it all up and we're good as new

Here, "we're good as new", does it mean "we are OK"? Is it common to say "we're good as new" when bad things are fixed?

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“good as new” refers to an object/relationship returning to it’s original status, by fixing or repairing OR it could be not literally for example when a car is used but looks in great condition you can say the car is “good as new”

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