In Spite of the Fact That a Corporation Does Not

question 6

Multiple Choice

In spite of the fact that a corporation does not meet the solvency test,it can

• A)buy back shares.
• B)pay wages to employees.
• C)pay dividends.
• D)make loans to directors.
• E)none of the above

---

Definitions:

Liability Classification

The process of categorizing liabilities on the balance sheet as either current (due within one year) or long-term.

Short-Term Obligation

A debt or other financial obligation that is due to be paid within one year or within the entity's operating cycle if longer.

Long-Term Liability

Obligations or debts due in more than one year, reflecting a company's financing activities and including loans, bonds payable, and lease obligations.

GAAP Requirements

The standards or guidelines for financial accounting and reporting that accountants are required to follow, known as Generally Accepted Accounting Principles.