1. K. Canopy is the sole stockholder of Canopy Services, Inc. The company paid $

Question

1. K. Canopy is the sole stockholder of Canopy Services, Inc. The company paid $6,400 cash in dividends to Canopy. The entry to close the dividends account at the end of the year is:

A. Debit dividends $6,400; credit Cash, $6,400

B. Debit Retained Earnings $6,400; credit Dividends $6,400

C. Debit Dividends $6,400; credit Retained Earnings $6,400

D. Debit Retained Earnings $6,400, credit Salary Expense $6,400

E. Debit Income Summary $6,400; credit Retained Earnings $6,4

2. A debit is used to record which of the following?

A. A decrease in an asset account.

B. A decrease in an expense account.

C. An increase in a revenue account.

D. An increase in a contributed capital account.

E. An increase in the dividends account.

Explanation / Answer

1. The entry to close dividends account at the end of the year is

Reatined EArning Dr $6,400

Dividends Cr $6,400

So Option B is correct.

2. A debit increases asset , increases expenses , decreases revenue, decreases contributed capital and increases Dividend s account.

When dividend is paid CAsh in credited and Dividend a/c debited .

So the correct option is E.

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