When a Corporation Liquidates, It Performs Three Activities

question 19

Multiple Choice

When a corporation liquidates, it performs three activities. What is the general order of these activities in a plan of liquidation?

• A)pay debts, distribute property to shareholders, and wind up its affairs
• B)wind up its affairs, distribute property to shareholders, pay debts
• C)pay debts, wind up its affairs, and distribute property to shareholders
• D)wind up its affairs, pay debts, and distribute property to shareholders

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Definitions:

Collection

The process of gathering or accruing items or amounts owed to a business, typically in the context of accounts receivable.

Loan Made

Money that is lent to another party in exchange for future repayment of the loan value amount, plus interest.

Indirect Method

An accounting technique used to prepare the cash flow statement, where increases in non-cash current assets are subtracted from, and increases in current liabilities are added to, net income to arrive at net cash flow from operating activities.

Net Cash

The difference between all cash inflows and outflows within a given period, often used to assess financial health.