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

question 67

Multiple Choice

After preparing the financial statements for the current year, the accountant for Exquisite Gems closed the Dividends account at year-end by debiting Income Summary and crediting the Dividends account. What is the effect of this entry on current-year net income and the balance in the Retained Earnings account at year-end?

• A) Net income is overstated and the balance in the Retained Earnings account is correct.
• B) Net income is correct and the balance in the Retained Earnings account is overstated.
• C) Net income is understated and the balance in the Retained Earnings account is understated.
• D) Net income is understated and the balance in the Retained Earnings account is overstated.

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Definitions:

Suture Material

Specialized thread used to close wounds or surgical incisions, typically designed to be biocompatible with the body.

Sterile Field

An area kept free of microorganisms to prevent infection during surgical procedures, often achieved by using sterile techniques and materials.

Debridement

A medical procedure involving the removal of dead, damaged, or infected tissue to promote healing.

Lacerated Tissue

Tissue that has been torn or deeply cut, often seen in wounds that might require surgical repair.