Question

On December 30, Billy's Boat Yard (BBY) had $90,000 of cash, $20,000 of liabilities $30,000 of common stock, and $40,000 of unrestricted retained earnings. On December 31, BBY appropriated retained earnings in the amount of $18,000 for a future remodeling project. Required a. Record the December 31 appropriation in the following statements model. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (A), or financing activity (FA). If an element was not affected by the event, leave the cell blank. b. Determine the amount of dividends that BBY can pay immediately after the December 31 appropriation

Answer 1

To record the December 31 appropriation in the statements model, deduct the appropriation amount from Unrestricted Retained Earnings and add it to the Appropriated Retained Earnings. There will be no impact on the Cash Flow section. The amount of dividends BBY can pay immediately after the appropriation is $22,000.

Step-by-step explanation:

To record the December 31 appropriation in the statements model, we need to determine which sections of the model will be affected. In this case, the appropriation will only impact the Retained Earnings section. The amount of the appropriation is $18,000. We deduct this amount from the Unrestricted Retained Earnings column and add it to the Appropriated Retained Earnings column. The Cash Flow column will remain blank since this appropriation does not involve any cash inflow or outflow.

To determine the amount of dividends BBY can pay immediately after the appropriation, we need to subtract the appropriation from the unrestricted retained earnings. So the amount of dividends BBY can pay will be $40,000 - $18,000 = $22,000.