Sam Snead, the Owner of Snead's Fine Golf Wear, Used $\begin{array} { | c | r | r | } \hline \text { Withdrawals } & 1,800 & \\\hline \text { Cash } & & 1,800 \\\hline\end{array}$

question 78

Multiple Choice

Sam Snead, the owner of Snead's Fine Golf Wear, used $1,800 of his personal funds to go on vacation. Which of the following is the most appropriate treatment regarding this transaction?

• A) \(\begin{array} { | c | r | r | }
• \hline \text { Withdrawals } & 1,800 & \\
• \hline \text { Cash } & & 1,800 \\
• \hline
• \end{array}\)
• B) \(\begin{array} { | c | r | r | }
• \hline \text { Travel expense } & 1,800 & \\
• \hline \text { Cash } & & 1,800 \\
• \hline
• \end{array}\)
• C)record a memorandum in the general journal
• D)do not record the transaction in the general journal

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Definitions:

Modigliani and Miller

Theorists who developed propositions regarding the impact of capital structure on a company's value and its cost of capital, assuming no taxes and market imperfections.

Income Taxes

Taxes imposed by the government on the income generated by individuals or entities.

Capital Markets

Financial markets where debt or equity-backed securities are traded, facilitating the raising of capital by companies and governments.

EBIT-EPS Analysis

A study conducted to determine the impact of debt on a company's earnings before interest and taxes (EBIT) and its earnings per share (EPS).