Which of the Following Statements About Retained Earnings Is True

question 53

Multiple Choice

Which of the following statements about retained earnings is true?

• A) It is the amount of cash that has been retained from a company's earnings.
• B) It is the amount of creditors' claims on assets.
• C) It is increased when treasury stock is bought.
• D) It is the amount of corporate earnings that have been reinvested in the business

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Definitions:

Indirect Material

Materials used in the production process but cannot be directly traced to a final product, such as lubricants and cleaning supplies used in a factory.

Factory Overhead

Encompasses all indirect costs involved in the manufacturing process, such as utilities, maintenance, and management salaries.

Direct Materials

Raw materials that can be directly attributed to the production of goods or services.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting wear and tear, deterioration, or obsolescence.