1. If the corporation has a net loss for the period, the closing entry will include a debit to Income Summary and a credit to Retained Earnings.

True

False

2. Cash dividends reduce both the retained earnings and the stockholders' equity in the corporation.

True

False

3. Stock Dividends Distributable is reported as an addition to common stock in the stockholders' equity section of the balance sheet.

True

False

4. At year-end, an adjusting entry is necessary to recognize the correct amount of income taxes the corporation must pay for the year.

True

False

5. An entry is required both on the date of declaration and the date of payment.

True

False

6. Income taxes for a corporation are normally reported as a separate expense item on the income statement.

True

False

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Q/A

The effect of a retained earnings appropriation is to

A. Divide the retained earnings into two categories.

B. Increase cash and other assets.

C. Allow the corporation to use its assets for dividends.

D. Increase the number of shares of stock available.