What Is the Effect of a Corporation Appropriating Retained Earnings

question 69

Multiple Choice

What is the effect of a corporation appropriating retained earnings for the cost of treasury stock purchased?

• A)Contributed capital is overstated.
• B)A portion of retained earnings is restricted from the payment of dividends.
• C)Owner's equity is reduced by the amount of the appropriation.
• D)Income is overstated.

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Definitions:

Bank Statement

A monthly or periodic document summarising the financial transactions and balance in a person's bank account.

Reasonable Care

A legal standard that requires individuals to act with the same level of caution and attention that a reasonably prudent person would exhibit under similar circumstances.

Collecting Bank

A bank that processes checks and other negotiable instruments on behalf of a depositor, collecting funds from the bank on which the instruments are drawn.

Restrictive Endorsement

A limitation placed on the use of a check or other negotiable financial instrument, specifying conditions under which it can be transferred or cashed.