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

question 166

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 stockholders' equity.
• B) increase stockholders' 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:

Filing Jointly

Filing jointly refers to a tax filing status that allows married couples to combine their income and deductions on a single tax return, potentially leading to tax benefits.

Net Book Value

The value of an asset or liability according to a company's balance sheet, deducting depreciation or amortization.

Accumulated Depreciation

Accumulated depreciation is the total amount of depreciation expense that has been recorded against a fixed asset over its useful life to date.

Depreciation Expense

The allocation of the cost of a tangible fixed asset over its useful life, reflecting the consumption or wear and tear of the asset.