For Each of the Following Events:
(1) State Whether the Event

question 115

Essay

For each of the following events:
(1) State whether the event increases (INC) or decreases (DEC) retained earnings. If the event does not affect retained earnings, state NE for no effect.
(2) State which equity account is affected.
$$\begin{array} { | l | l | } \hline \text { Event } & \text { 1. Retained earnings:INC, DEC, NE } \\& \text { 2. Which equity account is affected? } \\\hline \text { Distribution of a corporation's earnings } & \\\text { to stockholders } & \\\hline \text { Creditor loaned money to the business } & \\\hline \text { Costs of selling goods or services } & \\\hline\end{array}$$

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Definitions:

Class Asset

Categories of assets grouped together based on having similar financial characteristics, often used in finance for valuation and risk assessment.

Like-kind Treatment

A tax deferral for exchanges of business or investment properties of similar nature, per Internal Revenue Code Section 1031.

Involuntary Conversion

A loss or destruction of property that is unexpected and not initiated by the property owner, which can have tax implications for gains received from insurance or other compensation.

Qualifying Replacement Property

Property that is acquired to replace a property involved in an involuntary conversion, and meets certain criteria to defer recognition of gain for tax purposes.