Car and Auto Sisters had retained earnings of $18,000 on the balance sheet but disclosed in the footnotes that $3,000 of retained earnings was restricted for plant expansion and $1,000 was restricted for bond repayments. Cash of $2,000 had been set aside for the plant expansion. How much of retained earnings is available for dividends?

Question

Quizplus · Accepted Answer

Retained earnings of $18,000 less $3,000 restricted for plant expansion and less $1,000 restricted for bond repayments leaves $14,000 available for dividends. The cash set aside for the plant expansion does not affect the calculation of available retained earnings for dividends.

Car and Auto Sisters Had Retained Earnings of $18,000 on the Balance