Interpreting a restriction on retained earnings [5 min]JP Corporation reported the followi...

Interpreting a restriction on retained earnings [5 min]

JP Corporation reported the following stockholders’ equity:

Requirements

1. JP Corporation’s agreement with its bank lender restricts JP’s dividend payments for the cost of treasury stock the company holds. How much is the maximumamount of dividends JP can declare?

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2. Why would a bank lender restrict a corporation’s dividend payments and treasury stock purchases?