Which of the Following Describes Retained Earnings

question 88

Multiple Choice

Which of the following describes retained earnings?

• A) Internally generated capital that results from profitable business transactions
• B) Externally generated capital that is contributed by shareholders
• C) Externally generated capital that is raised from banks and other creditors
• D) Internally generated capital that results from employees' contributions

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Definitions:

Salvage Value

The estimated residual value of an asset after its useful life has ended and it can no longer be used for its originally intended purpose.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting how much of the asset's value has been used up during a specific period.

Useful Life

The estimated period over which an asset is expected to be utilizable or productive before it is fully depreciated.

Straight-Line

A method of calculating depreciation or amortization by evenly distributing the cost over an asset's useful life.