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George and Erin Are Divorced, and George Is Required to Pay

question 114

True/False

George and Erin are divorced, and George is required to pay Erin $20,000 of alimony each year. George earns $75,000 a year. Erin is required to include the alimony payments in gross income although George earned the income.


Definitions:

Retained Earnings

The portion of a company's profits not distributed as dividends to its shareholders but kept in the company to reinvest in its core business or to pay debt.

Equity Section

The portion of a company's balance sheet that represents the owners' claims to the assets after all liabilities have been deducted.

Treasury Stock

Shares of a company's own stock that it has reacquired from shareholders and holds in its treasury.

Paid-In Capital

Refers to the amount of money that a company's shareholders have invested through the purchase of shares.

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