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 effects of the appropriation on the elements of the financial statements?

Question

Quizplus · Accepted Answer

Appropriating retained earnings has no impact on the elements of the financial statements, aside from shifting the $75,000 from retained earnings to appropriated retained earnings. Total stockholders' equity does not change.

Chadwick Associates Retained $850,000 of Net Income in the Business