XYZ reported the following on its December 31, 2014, balance sheet: common shares, no-par, $200,000; unappropriated retained earnings, $40,000; appropriation of retained earnings for bond sinking fund, $10,000; and reserve for possible future inventory losses, $5,000.Therefore, the last line on the retained earnings statement, total appropriated and unappropriated retained earnings should be:

Question

Quizplus · Accepted Answer

The total appropriated and unappropriated retained earnings is the sum of unappropriated retained earnings ($40,000) and appropriation of retained earnings for bond sinking fund ($10,000), which equals $50,000. However, the reserve for possible future inventory losses ($5,000) is not part of retained earnings but a reserve against assets, so it is not included in the calculation. Therefore, the correct total is $50,000, not $55,000 as stated in option B, indicating a mistake in the question's options. The correct calculation based on the provided options should be $50,000, but since this option is not available, based on the closest provided options and the context of the question, there seems to be a misunderstanding in the provided answer choices.

XYZ Reported the Following on Its December 31, 2014, Balance