Which of the following statements is FALSE concerning the requirements that must be fulfilled under a financial reorganization?
A) The corporation's shareholders must approve the financial reorganization.
B) Immediately after the financial reorganization, the corporation must have a credit balance in retained earnings.
C) New asset valuations should not deliberately over- or understate assets or liabilities.
D) The corporation may have additional contributed surplus arising from the financial reorganization.

Question

Quizplus · Accepted Answer

Immediately after the financial reorganization, the corporation may have a debit balance in retained earnings, as it may have incurred losses or written down assets during the process. However, the financial reorganization should aim to improve the financial stability and performance of the corporation in the long term. The other statements are true requirements for a financial reorganization, such as obtaining shareholder approval, ensuring fair and accurate asset valuations, and creating additional contributed surplus if applicable.

Which of the Following Statements Is FALSE Concerning the Requirements