A restriction of retained earnings is most likely to be required by
A) incurring a net loss in the current year.
B) incurring a net loss in the prior year.
C) purchasing treasury stock.
D) reissuing treasury stock.

Question

Quizplus · Accepted Answer

Restrictions of retained earnings are often required when a company purchases treasury stock. This is because the repurchase of shares reduces the amount of equity available to be paid out as dividends, and the restriction ensures that the company maintains enough retained earnings to meet its financial obligations and possibly continue its operations without jeopardizing its financial health.

A Restriction of Retained Earnings Is Most Likely to Be