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

Multiple Choice

After preparing the financial statements for the current year,the accountant for Exquisite Gems closed the Dividends account at year-end by debiting Income Summary and crediting the Dividends account.What is the effect of this entry on current-year net income and the balance in the Retained Earnings account at year-end?

A) Net income is overstated and the balance in the Retained Earnings account is correct.
B) Net income is correct and the balance in the Retained Earnings account is overstated.
C) Net income is understated and the balance in the Retained Earnings account is correct.
D) Net income is understated and the balance in the Retained Earnings account is overstated.