Hot Tamale Company Had $120,000 of Revenues and $125,000 of Expenses

question 160

Multiple Choice

Hot Tamale Company had $120,000 of revenues and $125,000 of expenses. No dividends were paid. The first of the year-end closing entries should include which of the following line items?

• A) Credit Retained earnings $120,000.
• B) Debit Retained earnings $120,000.
• C) Debit Income summary $120,000.
• D) Credit Income summary $120,000.

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Definitions:

Preferred Stock

A class of ownership in a corporation with a higher claim on assets and earnings than common stock, often paying fixed dividends.

Callable Preferred Stock

A type of preferred stock that gives the issuer the right to redeem the stock at a predetermined price after a certain date.

Convertible Preferred Stock

A type of preferred stock that gives the holder the option to convert it into a specified number of common stock shares, usually at any time after a predetermined date.

Cumulative Preferred Stock

A type of preferred stock where dividends accrue if not paid as scheduled, ensuring holders receive dividends in arrears before common stockholders get any.