The Cost of Retained Earnings Is Less Than the Cost

question 87

Multiple Choice

The cost of retained earnings is less than the cost of new common stock because

• A) marginal tax brackets increase.
• B) flotation costs are incurred when new stock is issued.
• C) dividends are not tax deductible.
• D) accounting rules allow a deduction when using retained earnings.

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Definitions:

Erroneously Charged

Incorrectly or mistakenly billed for goods or services, leading to inaccurate financial transactions.

Bank Statement Balance

The ending cash balance as recorded in the bank's records at the end of a reporting period.

Check Outstanding

A check that has been written and recorded in the issuing account but has not yet been cleared or cashed by the bank.

Bank Reconciliation

The process of comparing and adjusting the balance shown on a bank statement with the amount shown in a company’s records to ensure they match.