Which of the Following Statements Is False

question 41

Multiple Choice

Which of the following statements is false?

• A) In bankruptcy, management is given the opportunity to reorganize the firm and renegotiate with debt holders.
• B) Because a corporation is a separate legal entity, when it fails to repay its debts, the people who lent to the firm (the debt holders) are entitled to seize the assets of the corporation in compensation for the default.
• C) As long as the corporation can satisfy the claims of the debt holders, ownership remains in the hands of the equity holders.
• D) If the corporation fails to satisfy debt holders' claims, equity holders may take control of the firm.

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Definitions:

Other Receivables

Financial claims against other entities besides accounts receivable, such as interest receivable, income taxes refundable, or insurance claims receivable.

Nontrade Receivables

Monies owed to a company that are not related to the sale of goods or services, such as loans to employees.

Loans

Loans refer to borrowed money that must be repaid with interest by the borrower to the lender, used typically for personal, business, or education purposes.

Allowance for Doubtful Accounts

A contra-asset account that reduces total accounts receivable to reflect the estimated amount of credit sales that may not be collected.