The Entry to Close the Expense Account(s) Was Entered in Reverse-Income

question 15

Multiple Choice

The entry to close the expense account(s) was entered in reverse-Income Summary was credited and the expense account(s) was/were debited. This error would cause:

• A) assets to be overstated.
• B) liabilities to be overstated.
• C) the Capital account to be understated.
• D) the Capital account to be overstated.

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Definitions:

Cram-Down Round

A financing round typically at a lower valuation, in which existing shareholders have their shares diluted if they do not participate.

Founders' Ownership

The proportion of a company's equity that is owned by its original creators or founders.

Dilution

A reduction in the ownership percentage of a share of stock caused by the issuance of new shares.

Share Price

The market price of a single share of a company's stock, reflecting the value investors place on the company.