2. Company X and Company Y are identical in all regards except that during 2019, Company X borrowed $100,000 at an interest rate of 5%. In contrast, Company Y obtained financing by acquiring $100,000 from the sale of common stock. Company Y agreed to pay a $5,000 cash dividend every year. Both companies are in a 20% tax bracket. Which company would show the greater retained earnings at the end of 2019 and by what amount?

A. Company X's retained earnings would be higher by $5,000. B. Company Y's retained earnings would be higher by $4,000. C. Company X's retained earnings would be higher by $1,000. D. Both would show the same retained earnings.

3. Current liabilities as of December 31, 2019 are the

A. obligations which were incurred during 2019 in the normal course of operating the business. B. debts on the balance sheet that must be repaid within the years 2020 and 2021. C. debts related only to operating activities of the company. D. debts on December 31, 2019 that are expected to be paid using current assets during 2020.

4. The difference between the corporate form of business organization and other forms is most clearly shown in which of the following sections of the financial statements?

A. assets section of the balance sheet B. expenses section of the income statement C. equity section of the balance sheet D. operating activities section of the statement of cash flows