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

Multiple Choice

A company with a $2,000,000 deficit undertakes a quasi-reorganization on November 1, 2020. 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, 2020, affect each of the following? $\begin{array}{c}&Capital~Stock&Total ~Stockholders' ~Equity\\\hlineA) &\text { No effect } & \text { No effect } \\B) &\text { No effect } & \text { Decrease } \\C) &\text { Decrease } & \text { Decrease } \\D) &\text { Decrease } & \text { No effect }\end{array}$