On the Statement of Retained Earnings

question 25

Multiple Choice

On the statement of retained earnings:

• A) there will be a positive balance in retained earnings if historically expenses have exceeded revenues.
• B) a deficit will result in retained earnings if historically, expenses have exceeded revenues.
• C) any dividends paid during the year will increase retained earnings.
• D) a deficit in retained earnings indicates the company has no cash.

---

Definitions:

Availability Heuristic

A mental shortcut that relies on immediate examples that come to mind when evaluating a specific topic, concept, method, or decision.

Lottery Jackpot

The largest prize available in a lottery, often accumulating until it is won.

Infinitesimal Odds

Extremely small chances or probabilities of a specific event occurring.

Framing Effects

In prospect theory, changes in people’s decision making caused by new information that alters the context, or “frame of reference,” that they use to judge whether options are viewed as gains or losses relative to the status quo.