A restriction of retained earnings is most likely to be required by the
A) Exhaustion of potential benefits of the investment credit
B) Purchase of treasury stock
C) Payment of last maturing series of a serial bond issue
D) Amortization of past service costs related to a pension plan

Question

Quizplus · Accepted Answer

DRestrictions of retained earnings are often required for specific purposes to ensure that a company maintains enough reserves for certain financial obligations or commitments. The purchase of treasury stock (B) can lead to a restriction of retained earnings because companies may set aside a portion of retained earnings to fund the repurchase of their own shares. Similarly, the amortization of past service costs related to a pension plan (D) can also result in a restriction of retained earnings, as companies may need to ensure they have sufficient funds to cover future pension liabilities, especially those arising from changes in pension plans or service costs that have not been previously recognized.

A Restriction of Retained Earnings Is Most Likely to Be