Practice Exercise #10-3

c

Which of the following statements is incorrect concerning appropriations of retained earnings?

a. Appropriations do not reduce total retained earnings.

b. An appropriation of retained earnings does not mean that assets are segregated for a specific purpose.

c. When treasury shares are purchased, retained earnings must be appropriated equal to the par or stated value of the treasury shares.

d. The only proper way to eliminate an appropriation of retained earnings after it has served its purpose is to revert the amount to the unappropriated retained earnings.

b

A restriction of retained earnings is most likely to be required by

a. reissuing treasury shares.

b. purchasing treasury shares.

c. incurring a net loss in the prior year.

d. incurring a net loss in the current year.

a

An entry is not made on the

a. date of record.

b. date of payment.

c. date of declaration.

d. an entry is made on all of these dates.

b

Which of the following would have an effect of increasing total retained earnings?

a. Share Premium – Treasury Share

b. Net income

c. Appropriations from retained earnings

d. Reversals of appropriation

a