Joe Is the Promoter of New Corporation (NC)

question 26

Multiple Choice

Joe is the promoter of New Corporation (NC) .He entered into various preincorporation contracts.NC was properly formed on January 1,2006.As a result:

• A)Joe is no longer personally liable on those preincorporation contracts.
• B)NC is automatically liable on those preincorporation contracts.
• C)Joe is jointly and severally liable on preincorporation contracts.
• D)Joe is not liable because NC released him from personal liability.

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Definitions:

Balance Sheet Approach

A method in accounting that focuses on valuing assets and liabilities at their current fair market values.

Adjusting Journal Entry

A journal entry made at the end of an accounting period to allocate income and expenses to the appropriate periods.

Allowance for Doubtful Accounts

This is a subsidiary asset account created to approximate the amount of accounts receivable that could potentially be non-collectable.

Bad Debts Expense

An expense account reflecting estimated uncollectible amounts from customers for credit sales made in a specific period.