Accounting Chapter 20 & 21 Review

A publicly held corporation is only permitted to issue common stock.

False

Closing entries transfer the balances of the permanent accounts to the temporary accounts.

False

For a merchandising corporation, there are four closing entries.

False

In the first closing entry, the Sales account and the contra Sales accounts are closed into Income Summary.

False

Once a dividend is declared, a journal entry must be recorded only on the date of payment.

False

Preferred stockholders receive dividends after dividend payments have been made to the common stockholders.

False

Stock may be sold for a price less than its par value when the corporation first issues it to the public.

False

The closing entries for a merchandising business are made to bring the balance of the Merchandise Inventory account up to date.

False

The management of a corporation is elected by the stockholders.

False

When a dividend is paid, the total amount of the dividend is debited to the Cash in Bank account.

False

A corporation is considered to be a separate legal entity.

True

A post-closing trial balance is prepared to test the equality of the general ledger after all adjusting and closing entries have been posted.

True

After closing entries have been posted, the temporary accounts will have zero balances.

True

All of the information needed to record the closing entries is found in the Income Statement section of the worksheet.

True

Closing entries prepare the general ledger for use during the next accounting period.

True

Common stockholders have the right to vote for the corporate board of directors.

True

Investors usually buy preferred stock to receive the stated dividend that it pays.

True

The Paid-in Capital in Excess of Par account is a stockholders' equity account.

True

The par value of stock is decided before the stock is sold to the public.

True