Final answer:
The correct answer is D, which means the board's decision to appropriate retained earnings indicates that those funds are set aside for future expansion and not available for dividends. It is an internal earmarking of funds within the retained earnings for growth investments.
Step-by-step explanation:
An appropriation of retained earnings by the board of directors for future plant expansion will result in D. the disclosure that management does not intend to distribute, in the form of dividends, assets equal to the amount of the appropriation. This appropriation is essentially a commitment to reinvest earnings into the business for growth rather than paying them out to shareholders in the immediate future. It's an internal accounting action that classifies part of the retained earnings as reserved for a specific purpose.
Such an appropriation reflects a strategic decision by the board of directors to use profits to fund long-term investments, like the acquisition of new machinery, construction of new facilities, or the launch of research and development projects. This decision can help the company in expanding its operational capacity and potentially increasing future profits. Although it impacts the equity section of the balance sheet, it does not decrease the total retained earnings or the cash balance immediately. Instead, it earmarks funds within the retained earnings for specific uses, signaling to investors and stakeholders the company's plans for growth while ensuring that sufficient capital is retained to finance these plans.