What Effect Will the Following Closing Entry Have on the Retained

question 147

Multiple Choice

What effect will the following closing entry have on the retained earnings account?

• A)Retained earnings will remain unchanged.
• B)Retained earnings will decrease by $2,550.
• C)Retained earnings will increase by $2,550.
• D)Retained earnings will be transferred to the income statement.

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, factoring in the time value of money.

Growth Opportunities

Potential scenarios or investments that could lead to an increase in business scale, revenue, or profits.

No-growth Value

The value of a company assuming that it will not experience any future growth in earnings or dividends.

GAAP

Generally Accepted Accounting Principles; the standard framework of guidelines for financial accounting used in any given jurisdiction.