If the Board of Directors Authorizes a $100,000 Restriction of Retained

question 159

Multiple Choice

If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant expansion, the effect of this action is to

• A) decrease total assets and total equity.
• B) increase equity and decrease total liabilities.
• C) decrease total retained earnings and increase total liabilities.
• D) reduce the amount of retained earnings available for dividend declarations.

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Definitions:

Disbursements Schedule

A plan that outlines the expected payments to be made by an organization over a specified period.

Production Budget

An estimation of the number of units that must be produced in a given period to meet both sales and inventory needs.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.