What is Appropriated retained earnings?
In short
An appropriation of retained earnings is a board action that sets aside part of retained earnings for a specific purpose, such as a plant expansion, to show that it isn't available for dividends.
Key takeaways
- No cash or other asset is set aside; it only reclassifies retained earnings.
- It is reversed when no longer needed, never charged with costs or losses.
- Disclosing the restriction in the notes is the usual alternative.
Where it's tested
FAR: Equity & Earnings Per Share — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A company has net income of $600,000 and paid $50,000 in dividends on cumulative preferred stock during the year, none of which were declared. What amount should be used as the numerator for basic EPS?