Reporting a retained earnings restriction [10-15 min]
The agreement under which Rapid Copy issued its long-term debt requires the restriction of $150,000 of the company’s retained earnings balance. Total retainedearnings is $550,000 and common stock, no-par, has a balance of $110,000.
Requirement
1. Report stockholders’ equity on Rapid’s balance sheet, assuming the following:
a. Rapid discloses the restriction in a note. Write the note.
b. Rapid appropriates retained earnings in the amount of the restriction andincludes no note in its statements.
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