Question

1. The correcting entry to correct a sale on account recorded to the wrong customer in the sales journal involves Accounts Receivable and the subsidiary ledger accounts. A) True B) False 2. Net income increases a corporationâs total stock-holdersâ equity. A) True B) False3. A corporationâs Dividends account is a temporary account. A) True B) False4. The normal account balance of Purchases Returns and Allowances is a debit. A) True B) False5. An entry in the general journal that affects Accounts Payable also affects a vendorâs account in the accounts payable ledger. A) True B) False6. A corporation can decide if and when to declare a dividend.A) True B) False

Answer 1

Answer:

1. Correct answer is B, False

2. Correct answer is A, True

3. Correct answer is A, True

4. Correct answer is B, False

5. Correct answer is A, True

6. Correct answer is A, True

Explanation:

1. The correcting entry to correct sale on account recorded to the wrong customer does not involve Accounts receivable account. To correct the entry we have to debit the right customer account and credit the wrong customer account. To further illustrate;

Original entry:

Upon sales:

Debit accounts receivable - customer A $xx

Credit sales                                                $xx

Correcting Entry:

Debit accounts receivable - Customer B $xx

Credit accounts receivable - Customer A $xx

*This is necessary to properly account the balances of the ledger account per customer.

2. Net income increases the corporation's total shareholders' equity. Net income should be closed to Retained Earnings account which is part of the Shareholders' equity section.

3. A Corporation's dividend is a temporary equity account that will be debited upon declaration and will be closed to retained earnings account at the end of the accounting year.

4.The normal account of Purchase Returns and allowances is credit. It is a contra account of Purchases account which has a normal account balance of credit.

5. An entry to general journal accounts payable also affecting vendors' accounts payable ledger. From recognition in general journal, all accounts involving in accounts payable ledger should also be adjusted to properly account the suppliers balances.

6.A Corporation can decide if and when to declare dividend, it should be approved by the the shareholders or by the board of directors depending on the type of dividends that they are going to declare.