Answered: Continuous deficits in retained…

Business

Accounting

Continuous deficits in retained earnings is an indication of a business heading into bankruptcy. True or False

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter7: Deductions And Losses: Certain Business Expenses And Losses

Section: Chapter Questions

Problem 4DQ

See similar textbooks

Related questions

Q: What is the impact on A Company financial statements if the company forgets to recognize that…

A: Unearned Revenue - Unearned Revenue is the revenue which is not earned by the company but amount…

Q: The bookkeeper for your company made a mistake and forgot to accrue interest expense at the end of…

A: Introduction: Balance sheet: All Assets and liabilities are shown in Balance sheet. It tells the net…

Q: What are the possible actions when a business becomes insolvent?

A: Insolvency occurs when a person or business is unable to service the debt to lenders as debts come…

Q: Liquidation procedures 7B-1. Chapter 7 of the Bankruptcy Act is designed to do which of the…

A: Please find the answer to the above question below:

Q: retained earnings are not part of the stockholders claims on the company net assets true false

A: Retained earning means amount of profit remain after all the adjustment of expense and adjustments.

Q: Which of the following would result in the RETURN OF ASSETS for an accounting entity Deteriorating.…

A: Return on assets is an important accounting ratio which is calculated to analyse how much net income…

Q: A company uses the direct write-off method to account for bad debts. What is the impact on the…

A: Bad debt expense: Bad debt expense is an expense account. The amounts of loss incurred from…

Q: Which of the following would result in the RETURN OF ASSETS for an accounting entity deteriorating.…

A: It is a ratio that measures a company's ability to generate profit on the total amount invested. It…

Q: Choose the correct. What accounting is made for professional fees incurred during a bankruptcy…

A: Reorganization: Reorganizations provide official guidance for the preparation of financial…

Q: Briefly describe bankruptcy law. If a firm wereto default on its bonds, would the company…

A: It is a legitimate methodology started by an individual or a business that cannot pay their debts…

Q: Describe the financial reporting for a company that successfully exits bankruptcy as a reorganized…

A: Bankruptcy is popularly known as Chapter 11. If the company comes out of Chapter 11, the company can…

Q: On a balance sheet prepared for a company during reorganization, how are liabilities reported?a. As…

A: Liabilities refers to state of being legally responsible for something.

Q: Companies declare bankruptcy because their liabilities exceed their assets their shares…

A: Bankruptcy: When a business or a firm is not able to payout and honor its current obligations, then…

Q: Choose the correct. What is a cram down?a. An agreement about the total amount of money to be…

A: Identify the correct option: Option a: An agreement about the total amount of money to be reserved…

Q: Subsequent Events can be classified as adjusting events and non-adjusting events. For the list of…

A: Adjusting events: These are the events which provide evidence for the conditions which existed at…

Q: The income statement records all the revenues and expenses for a given period and shows whether the…

A: Income statement: It is a Financial statement that shows you how profitable your business was over a…

Q: A company expected to go bankrupt in the near future is considered to be operating under the…

A: Three fundamental assumptions of accounting are: 1.Going concern assumption 2. Accrual 3.…

Q: . Is bankruptcy a fairly common occurrence amonglarge companies, or is it restricted primarily to…

A: Actually in layman's language Bankruptcy is a situation in which liabilities of a business…

Q: Explain how a firm loses value during the bankruptcy process from both a creditors and a…

A: Bankruptency process Bankruptency process which are needed in the firm whether the firm are facing…

Q: State whether the following statements are true or false: 1 - A central question that must be…

A: Bankruptcy is the legal state where the individual or company becomes insolvent and will not be…

Q: Which of the following is correct when bad debt expense is recorded at year-end? Group of answer…

A: Bad debt is an expense incurred by a firm when a customer's repayment of credit previously granted…

Q: Accounts payables are long term liabilities for the business Select one: True False

A: Long-term liabilities are financial obligations of a company that are due more than one year

Q: A company’s management has uncovered events that indicate that substantial doubt exists that the…

A: The correct answer is Option (b).

Q: 15 Why does a business maintain a provision for doubtful debts account? A to apply the accounting…

A: Provision for doubtful debt is opened in the year in which receivables are predicted to become…

Q: In a perfect bankruptcy, a firm becomes bankrupt when all of the following occur, except: Multiple…

A: A firm becomes bankrupt if the value of its assets goes below the amount of money that it owes…

Q: lease clarify which list of accounts I can use. List of Accounts Assistance Used Accumulated…

A: Journal entries refers to reporting of the business transactions into the books of accounts and it…

Q: What assumption states that a business is able to financially continue operations and is not…

A: Accounting Principles- Accounting principles are the set of rules or principles defined for the…

Q: A bad debt is an expenses to the business and must be charged in the Statement of Profit or Loss and…

A: Bad debt: It can be defined as the receivable that will not be recovered or collected from the…

Q: A company accounts for possible bad debts using the allowance method. When an actual bad debt occurs…

A: Introduction:- A company accounts for possible bad debts using the allowance method. When an actual…

Q: Which situation here might indicate a company has a low quality of earnings? The same accounting…

A: Quality of earnings represents the earnings of the company in proportion to the operating activities…

Q: Which company is most likely closest to filing for bankruptcy in the near term? A) Company A which…

A: Bankruptcy is a negative situation for a business. This is the situation under which business is not…

Q: Explain what "financial distress" means. Let's say that a company is in financial difficulties, and…

A: Introduction: Financial Distress is defined as a scenario in which a company's obligations, such as…

Q: A company has a history of losses and has a negative balance (a debit) in retained earnings. On the…

A: The retained earnings comprises of net income or losses of the prior period.

Q: If a director allows a company to continue to trade indefinitely and the company is placed into…

A: In a partnership, two or more parties agree to operate and manage a business and share the profits…

Q: What accounting is made for professional fees incurred during a bankruptcy reorganization?a. They…

Q: rate of recovery

A: Option b is wrong because the rate of recovery is not applicable to unsecured creditors. Option c is…

Q: When it comes to reporting a company's income statement during a Chapter 11 bankruptcy, is it true…

A: The answer :

Q: A Corporation's accounting statement of affairs shows a recovery percentage of 120%. The rate of…

A: Liquidation of the company: A liquidation is a process of winding down a company and handing over…

Q: Define earnings persistence. How does earnings persistence relate to the reporting of discontinued…

A: Earnings persistence: Earnings persistence refers to the capability of the company to persist…

Q: Choose the correct. For a company emerging from bankruptcy, how are liabilities (other than deferred…

A: Liabilities: The claims creditors have over assets or resources of a company are referred to as…

Q: True or False?

A: A bankrupt company means a company that has been defaulted in the books of the banks. A company…

Q: Listed below are several statements that relate to financial accounting and reporting. Identify the…

A: Accounting concepts are the basic concepts and principles used by the company in recording and…

Question

Continuous deficits in retained earnings is an indication of a business heading into bankruptcy.

True or False

Definition Definition Remaining net income of the company after the required dividends are paid to shareholders. This surplus money is usually invested back into the business to expand its business operations or launch a new product.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Earnings Quality, Measurement and Management

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Choose the correct. For a company emerging from bankruptcy, how are liabilities (other than deferred income taxes) reported?a. At their historical value.b. At zero because of fresh start accounting.c. At the present value of the future cash flows.d. At the negotiated value less all professional fees incurred in the reorganization.
Define each when dealing with financial responsibility: Accounting and financial reporting matters Bankruptcy Buyouts Downsizing Failure to maintain accurate expense reports Financial fraud ("cooking the books") Fraud Inflated earnings reports Insider information Insider trading
For a company emerging from bankruptcy, how are liabilities (other than deferred income taxes) reported?a. At their historical value.b. At zero because of fresh start accounting.c. At the present value of the future cash flows.d. At the negotiated value less all professional fees incurred in the reorganization.
Suppose an accountant discovers that the company holds substantial amounts of inventory that are now obsolete and worthless. Should the accountant report the truth, write off the inventory as an asset, and take a loss on obsolete inventory in earnings? Suppose the accountant also knows that the company is already in distress. Should the accountant seek ways to avoid or delay recognizing inventory losses that will cause the company to report lower earnings and thereby experience a drop in stock price and potential bankruptcy? What if the accountant knows the company is growing quickly and generating healthy profits?
A company uses the direct write-off method to account for bad debts. What is the impact on the accounting equation of the entry to record the write-off of a customer’s account balance? Assets and liabilities decrease. Assets and shareholders’ equity decrease. Assets increase and shareholders’ equity decreases. Shareholders’ equity and liabilities decrease.
Explain what "financial distress" means. Let's say that a company is in financial difficulties, and explain how and why it might affect its equity.
What are some situations other than immediate financial distressthat lead firms to file for bankruptcy?
A company uses the direct write-off method to account for bad debts. What are the effects on the accounting equation of the entry to record the write-off of a customer's account balance? a. Assets increase and Stockholders' equity decrease b. Assets and Stockholders' equity decrease c. Stockholders' equity and liabilities decrease d. Assets and liabilities decrease
Under standard accounting rules, it is possible for a company’s liabilities to exceed its assets. When this occurs,the owners’ equity is negative. Can this happen with market values? Why or why not?
An example of a Type I subsequent event would be A. a sudden change in senior management after the financial statement date B. a filing with the Securities and Exchange Commission (SEC) of an amended form 10K after the financial statement date C. the bankruptcy of a client’s customer after year-end as a result of poor financial condition that existed as of the balance sheet date D. the bankruptcy of a client’s customer after year-end as a result of poor financial condition that existed after the balance sheet date
Choose the correct. Which of the following is not a reorganization item for purposes of reporting a company’s income statement during a Chapter 11 bankruptcy?a. Professional fees.b. Interest revenue.c. Interest expense.d. Gains and losses on closing facilities.
A company has a history of losses and has a negative balance (a debit) in retained earnings. On the balance sheet, what should this account be called? Group of answer choices Retained earnings, with amount shown as a negative Accumulated deficit, with amount shown as a negative Negative retained earnings, with amount shown as a negative