ABC Ltd Is a Closely Held Corporation

question 142

Multiple Choice

ABC Ltd. is a closely held corporation. Two of the shareholders serve as directors. As directors, they voted to issue themselves more shares to increase their voting control of the corporation. Which of the following provisions would aid the other shareholders?

• A) Relief-from-oppression provisions
• B) Pre-emptive right provisions
• C) Derivative-action provisions
• D) Dissent procedure
• E) Indoor-management rule

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account that reduces accounts receivable to its net realizable value, representing estimated uncollectible amounts.

Liability Account

An accounting record that tracks the money owed by a business to creditors, lenders, and suppliers, part of the company's liabilities.

Direct Write-Off Method

This accounting practice writes off bad debts directly against income at the time they are determined to be uncollectible, bypassing any allowance account.

Allowance for Doubtful Accounts

This is an estimation of the amount of receivables that a company does not expect to actually collect, reflecting potential losses due to customers' inability to pay.