Business, 07.04.2020 04:54 limelight11

In 2007, Wagner Associates appropriated $65,000 of retained earnings to satisfy the restrictive covenant of a loan agreement. What are the financial statements effects of the appropriation

Answers: 1

Show answers

Answers

Answer from: fernn2133

The financial statements effects of the appropriation are as follows:

a) Retained Earnings will reduce by $65,000 in the Income Statement and the Balance Sheet.

b) Cash balance will also reduce by $65,000 in the Balance Sheet.

Explanation:

Normally, partnerships can distribute or appropriate their profits according to their partnership agreements. However, there may be restrictive loan covenants that can specify how much profits partnerships can distribute among the partners. The purpose of such covenants is to ensure that the ability of the partnership to repay loans are not compromised through profit appropriations.

Financial institutions, therefore, to secure the loans advanced to businesses may include restrictive covenants. Some restrictive covenants may specify the minimum cash balance to maintain. Restrictive covenants, generally, remain measures to overcome unwanted business outcomes. It is a form of insurance against loan repayments.

Answer from: Shaynele

Reduction of $65,000 retained earnings and cash balance in the balance sheet

Explanation:

The financial statement effect of the appropriation is that

retained earnings and cash balance will reduce by $65,000 in the balance Sheet.

There are two entries on the balance sheet of a firm

(1) retained earnings and (2) cash equivalent.

1) Retained earnings refers to the running total of a firm's profits and losses. Retained earnings is basically the reinvestment of profit back into the business.

A firm can make two types of decision regarding Profit (1) return to firm's shareholders as dividend or (2) reinvent the profit into the firm.

The reinvested Profit is referred to as "retained earnings".

2) Cash equivalent refers to short-term investment that can be converted into cash within a short period of time.

Answer from: Quest

answer: d. characteristics of guests

explanation: it is directly related to the spending characteristics of attendees who fall into each of these categories:

Answer from: Quest

answer; experimentation;

Another question on Business

Business, 22.06.2019 20:00

Qwest airlines has implemented a program to recycle all plastic drink cups used on their aircraft. their goal is to generate $7 million by the end of the recycle program's five-year life. each recycled cup can be sold for $0.005 (1/2 cent). a. how many cups must be recycled annually to meet this goal? assume uniform annual plastic cup usage and a 0% interest rate. b. repeat part (a) when the annual interest rate is 12%. c. why is the answer to part (b) less than the answer to part (a)?

Answers: 1

Answer

Business, 22.06.2019 21:20

Rediger inc., a manufacturing corporation, has provided the following data for the month of june. the balance in the work in process inventory account was $28,000 at the beginning of the month and $20,000 at the end of the month. during the month, the corporation incurred direct materials cost of $56,200 and direct labor cost of $29,800. the actual manufacturing overhead cost incurred was $53,600. the manufacturing overhead cost applied to work in process was $52,200. the cost of goods manufactured for june was:

Answers: 2

Answer

Business, 22.06.2019 22:20

Who owns a renter-occupied apartment? a. the government b. a landlord c. the resident d. a cooperative

Answers: 1

Answer

Business, 22.06.2019 23:00

Even sole proprietors should have at least how many computers? 1 2 3 4

Answers: 1

Answer

You know the right answer?

In 2007, Wagner Associates appropriated $65,000 of retained earnings to satisfy the restrictive cove...