Retained earnings in the amount of the distribution are transferred to capital stock, in some instances in an amount in excess of that required by the laws of the state of incorporation.

Question

Quizplus · Accepted Answer

Retained earnings are not transferred to capital stock. They are kept within the company for reinvestment or other purposes. Additionally, transferring an excess amount to capital stock may not be allowed by the laws of the state of incorporation.

Retained Earnings in the Amount of the Distribution Are Transferred