(L.OBJ. 4) Reporting a retained earnings restriction [10—15 min]
The agreement under which Perfecto Printers issued its long-term debt requires the restriction of $200,000 of the company’s retained earnings balance. Total retained earnings is $570,000, and common stock, no-par, has a balance of $30,000.
Requirement
1. Report stockholders’ equity on Perfecto’s balance sheet, assuming the following:
a. Perfecto discloses the restriction in a note. Write the note.
b. Perfecto appropriates retained earnings in the amount of the restriction and includes no note in its statements.
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