In 2014, Wagner Associates appropriated $65,000 of retained earnings to satisfy the restrictive covenant of a loan agreement. What are the financial statement effects of the appropriation?

Question

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The appropriation of $65,000 from retained earnings will result in a decrease in Wagner Associates' retained earnings balance by the same amount. This will be reflected on the balance sheet under Stockholders' Equity. There will be no effect on the income statement as this is a non-operating transaction. There will also be no effect on the cash flow statement as this is an appropriation of existing funds and does not involve a change in cash flows.

In 2014, Wagner Associates Appropriated $65,000 of Retained Earnings to Satisfy