If a Company Has a Deficit in Retained Earnings

question 111

Multiple Choice

If a company has a deficit in retained earnings:

• A) then retained earnings has a credit balance.
• B) the deficit is subtracted to determine total stockholders' equity.
• C) the deficit is added to determine total stockholders' equity.
• D) then the corporation's lifetime earnings exceed lifetime losses and dividends.

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Definitions:

S Corporation

A specific kind of corporation in the U.S. that conforms to certain Internal Revenue Code criteria, which permits it to distribute income directly to its shareholders, thereby bypassing the double taxation issue.

Double Taxation

The imposition of two or more taxes on the same income, asset, or financial transaction, often seen in international business where income is taxed in both the source and the resident country.

Secured Bond

A bond backed by collateral to decrease the risk of default.

Due Process

A fundamental legal principle that ensures fair treatments and procedures are followed by the government before depriving a person of life, liberty, or property.