Which of the Following Statements About Involuntary Conversions Is False

question 45

Multiple Choice

Which of the following statements about involuntary conversions is false?

• A)An involuntary conversion may result from condemnation or fire.
• B)The gain or loss from an involuntary conversion is reported in other income and expense on the income statement.
• C)The gain or loss from an involuntary conversion should not be recognized when the company reinvests in replacement assets.
• D)None of these answer choices are false.

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Definitions:

New Shares

Additional shares issued by a company, either through public offering, private placement, or stock splits, increasing the total number of outstanding shares.

Fair Value Allocation

The process of assigning a fair market value to all assets and liabilities of a company, often conducted during the acquisition process.

Par Value

Par value is the nominal or face value of a bond, stock, or other financial instrument, as stated by the issuer.

Common Stock

Shares of ownership in a corporation that entitle the shareholder to a share of the company’s profits and a right to vote on company matters.