Which of the Following Does Not Correctly Describe the Following

question 100

Multiple Choice

Which of the following does not correctly describe the following adjusting journal entry?

• A)Total assets decrease.
• B)Retained earnings are not affected.
• C)Stockholders' equity decreases.
• D)Net income decreases.

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Definitions:

M&M Proposition II

A theory proposing that the cost of equity increases as a company increases its leverage, due to the riskier equity stream.

Debt-Equity Ratio

A ratio assessing the comparative financing from equity and debt for a company’s assets.

Cost of Equity

The return a company theoretically pays to its equity investors, conceived as a compensation for taking on the risk of investing.

Break-Even Point

The point at which total revenues equal total expenses, and the business neither makes a profit nor incurs a loss.