During 2010, Elaine Corp. (a calendar-year company) declared $46,000 of dividends. The dividends have not been paid by December 31, 2010. At year-end, Elaine Corp. will

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Dividends are closed to Retained Earnings at the end of the fiscal year, not to the Income Summary. The declaration of dividends reduces retained earnings and increases the dividends payable liability. When dividends are closed out, the Dividends account is debited and Retained Earnings is credited.