After preparing the financial statements for the current year, the accountant for Barbara's Jewel Co closed the dividends account at year-end by debiting Retained Earnings and crediting the dividends account. What is the effect of this entry on current-year net income and the balance in the owners' equity account(s) at year-end?
A) Net income is overstated; balance in the retained earnings account is correct.
B) Net income is correct; balance in the capital stock account is correct.
C) Net income is understated; balance in the capital stock account is correct.
D) Net income is understated; balance in the retained earnings account is understated.

Question

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The Answer of After preparing the financial statements for the current year, the accountant for Barbara's Jewel Co closed the dividends account at year-end by debiting Retained Earnings and crediting the dividends account. What is the effect of this entry on current-year net income and the balance in the owners' equity account(s) at year-end?
A) Net income is overstated; balance in the retained earnings account is correct.
B) Net income is correct; balance in the capital stock account is correct.
C) Net income is understated; balance in the capital stock account is correct.
D) Net income is understated; balance in the retained earnings account is understated.

After Preparing the Financial Statements for the Current Year, the Accountant