A Company with a $2,000,000 Deficit Undertakes a Quasi-Reorganization on November

question 25

Multiple Choice

A company with a $2,000,000 deficit undertakes a quasi-reorganization on November 1,2017.Certain assets will be written down by $400,000 to their present fair market value.Liabilities will remain the same.Capital stock was $3,000,000 and additional paid-in capital was $1,000,000 before the quasi-reorganization.How would the entries to accomplish these changes on November 1,2017,affect each of the following? Capital Stock Total Stockholders' Equity

• A)No effect No effect
• B)No effect Decrease
• C)Decrease Decrease
• D)Decrease No effect

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Definitions:

Bananas

A type of fruit that is elongated, curved, and covered with a peel, typically yellow when ripe, and consumed as a sweet source of energy.

Perfect Substitute

Goods that can be used in place of one another with no loss of utility for the consumer, indicating a one-to-one substitutability.

Utility Function

A mathematical representation that assigns a level of utility or satisfaction to different bundles of goods, allowing preferences to be compared quantitatively.

Indifference Curve

A graph showing different bundles of goods between which a consumer is indifferent, meaning that the consumer has no preference for one bundle over the other.