Question

At the time of liquidation, Fairchild Company reported assets of $200,000, liabilities of $120,000, common stock of $90,000 and retained earnings of ($10,000). What amount of Fairchild's assets are the shareholders entitled to receive?a) $200,000b) $80,000c) $90,000d) $100,000

Answer 1

c) $90.000

Explanation:

common stock is easy to sell, but is not real money at the time of liquidation.

Assets are count as money , but is necessary to pay de debts, (liabilities).

At the time of liquidation, $200.000 (assets) -$120.000 (liabilities) = $80.000

+ Retained earnings ($10.000) = $90.000 .