After Preparing the Financial Statements for the Current Year, the Accountant

question 107

Multiple Choice

After preparing the financial statements for the current year, the accountant for Barbara's Jewel Co closed the dividends account at year-end by debiting Retained Earnings and crediting the dividends account. What is the effect of this entry on current-year net income and the balance in the owners' equity account(s) at year-end?

• A) Net income is overstated; balance in the retained earnings account is correct.
• B) Net income is correct; balance in the capital stock account is correct.
• C) Net income is understated; balance in the capital stock account is correct.
• D) Net income is understated; balance in the retained earnings account is understated.

Identify strategies for creating effective notes that enhance understanding and retention of material.

Master the skills needed to verify the accuracy and integrity of summaries and paraphrased content.

Know how to integrate quotations seamlessly into text and understand their impact on readers.

Acquire knowledge of intellectual property laws relevant to academic work.

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Definitions:

Typical Welfare

Governmental support programs designed to assist individuals or families in meeting basic needs, such as food, shelter, and healthcare.

Family

A social unit consisting of individuals related by blood, marriage, or other forms of partnership and commitment.

Present Value

The current value of a future sum of money or stream of cash flows, given a specified rate of return.

Economic Rent

It is the payment to an owner or factor of production in excess of the costs needed to bring that factor into production. In other words, it's the extra income earned from a resource without investing in additional effort or cost.