When the Owner of a Sole Proprietorship Withdraws Assets from the Business

question 133

Multiple Choice

When the owner of a sole proprietorship withdraws assets from the business for personal use,

• A)it is treated like a noncash dividend.
• B)it is illegal because the assets belong to the separate entity,the proprietorship.
• C)it would be recorded as a loss by the proprietorship.
• D)it is recorded as a reduction of owner's equity.

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Definitions:

Long-Run Equilibrium

A state in which all factors of production are used efficiently, market supply and demand are balanced, and there is no tendency for change in the economic variables.

Expansionary Gap

A situation where the actual output in an economy exceeds the potential output due to high demand, often leading to inflationary pressures.

Short-Run Aggregate Supply

The total supply of goods and services that firms in an economy plan on selling during a short time period, given the current level of prices.