Which of the Following Statements Best Describes the Recognition of Loss

question 118

Multiple Choice

Which of the following statements best describes the recognition of loss on property transferred to shareholders in complete liquidation of a corporation?

• A)The liquidated corporation always recognizes loss on the distribution of property in complete liquidation of the corporation.
• B)The liquidated corporation never recognizes loss on the distribution of property in complete liquidation of the corporation.
• C)The liquidated corporation recognizes loss on the distribution of property in complete liquidation of the corporation if the property is distributed to individuals who are not related parties to the corporation.
• D)The liquidated corporation recognizes loss on the distribution of property in complete liquidation of the corporation only if the property is distributed to individuals who are related parties to the corporation.

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Definitions:

Assumptions

Premises or conditions accepted as true or certain without proof for the purpose of further analysis or argument.

Basic Assumptions

Fundamental beliefs or principles that underlie the financial accounting system, including economic entity, monetary unit, time period, and going concern.

Internal Growth Rates

The maximum rate at which a company can expand using only internal financial resources without resorting to borrowing or seeking new equity investment.

External Financing Needs (EFN)

The amount of funding a business requires from external sources to finance its planned growth or expansion activities.