There Are Four Closing Entries

question 22

Multiple Choice

There are four closing entries. The first one is to close revenues, the second one is to close expenses, the third one is to close ____, and the last one is to close the ____.

• A) Income Summary; dividends account
• B) Income Summary; common stock account
• C) Income Summary; assets
• D) dividends account; Income Summary

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Definitions:

Dividend Level

The amount of dividend payment declared by a company per share, usually expressed in a currency value.

Stock Price

The current price at which a share of a company is trading on the stock market.

Signaling Theory

A concept in economics and finance that suggests that decisions made by companies can convey information to investors and the market about the firm's future prospects.

Dividend Irrelevance

Dividend Irrelevance theory suggests that a company's dividend policy has no effect on either its value or its cost of capital, according to Modigliani and Miller.