An Audit Program for the Examination of the Retained Earnings

question 3

Multiple Choice

An audit program for the examination of the retained earnings account should include a step that requires verification of the:

• A)Market value used to charge retained earnings to account for a two-for-one stock split.
• B)Approval of the adjustment to the beginning balance as a result of a write-down of an account receivable.
• C)Authorization for both cash and stock dividends.
• D)Gain or loss resulting from disposition of treasury shares.

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Definitions:

Substitutes

Goods or services that can replace each other in use, where an increase in the price of one leads to an increase in demand for the other.

Inferior Good

A type of good for which demand decreases as the income of consumers increases.

Demand Curve

A diagram that shows how the quantity of a product demanded by buyers changes according to its price.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity of that good that consumers are willing to purchase at various prices.