Immediately after a financial reorganization, the retained earnings account
A) has a zero balance.
B) remains the same as it was before the financial reorganization.
C) is frozen and dated, and subsequent transactions will be shown separately.
D) has a debit balance equal to the write down of the assets which were overstated.

Question

Quizplus · Accepted Answer

Retained earnings represents the accumulated profits of a company that are not paid out as dividends. A financial reorganization involves major changes to the structure of a company's operations, which typically result in a significant write-down of assets or other adjustments that can affect the retained earnings balance. Therefore, after a financial reorganization, the retained earnings account will typically have a zero balance, as the previous earnings are wiped out and a new starting point is established.

Immediately After a Financial Reorganization, the Retained Earnings Account