Question

Turquoise and Topaz Sisters had Retained Earnings of $10,000 on the balance sheet but disclosed in the footnotes that $2,000 of Retained Earnings was restricted for plant expansion and $1,000 was restricted for bond repayments. Cash of $2,000 had been set aside for the plant expansion. How much of Retained Earnings is available for Dividends?

Answer 1

Answer:

The $7,000 of Retained Earnings is available for Dividends.

Explanation:

Note: The Cash of $2,000 that had been set aside for the plant expansion does not affect the unrestricted retained earnings. it is just confirms that they have restricted the $2,000 of retained earnings for the plant expansion, in form of cash.

Retained Earnings available for dividends = $10,000 - $3,000

                                                                      = $7,000

Therefore, The $7,000 of Retained Earnings is available for Dividends.