Chadwick Associates retained $850,000 of net income in the business in Year 1. If $75,000 was appropriated to satisfy the restrictive covenant of a loan agreement, what are the financial statements effects of the appropriation? 
Definitions:
Inventories
Assets held for sale in the ordinary course of business, or materials that will be used in the production of goods to be sold.
Year 2
Typically refers to the second year of a company's operations or performance being analyzed.
Variable Costing
An accounting method in which variable costs are charged to cost units and fixed costs are treated as period costs and directly charged to the profit and loss account.
Operating Income
The profit realized from a business's core operations, excluding deductions of interest and tax.
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