Chad Associates Retained $825,000 of Net Income in the Business

question 30

Multiple Choice

Chad Associates retained $825,000 of net income in the business in 2013. If $85,000 was appropriated to satisfy the restrictive covenant of a loan agreement, what are the financial statements effects of the appropriation?

• A)Option A
• B)Option B
• C)Option C
• D)Option D

---

Definitions:

Safety Margin

The difference between the actual level of sales or production and the break-even point, measuring the cushion a company has before it incurs losses.

Break Even Point

The financial analysis term where total revenues equal total expenses, and there is no profit or loss.

Budgeted Revenue

The amount of income that a company plans or expects to generate over a certain period, often used for planning and performance evaluation purposes.

After-Tax Profit

The net income a company generates after all taxes have been deducted from total revenues.