A corporation had the following account balances on December 31: $$\begin{array} { | l | l | l | l | }
\hline \text { Assets } & & \text { Equities } & \
\hline \text { Cash } & \$ 10 & \text { Accounts payable } & \$ 2 \
\hline \text { Accounts receivable } & 8 & \text { Wages pay able } & 12 \
\hline \text { Inentory } & 16 & \text { Common shares } & 48 \
\hline \text { Machinery } & 42 & \text { Retained earnings appropriated tor bond } & \
\hline & & \text { Sinking fund } & 8 \
\hline & \$ 76 & \text { Retained earnings unappropriated } & 6 \
\hline & & & \$ 76 \
\hline
\end{array}$$ The maximum amount of cash dividends that could be declared on this date is:
A) $6
B) $10
C) $14
D) $76

Question

A corporation had the following account balances on December 31: $$\begin{array} { | l | l | l | l | } 
\hline \text { Assets } & & \text { Equities } & \
\hline \text { Cash } & \$ 10 & \text { Accounts payable } & \$ 2 \
\hline \text { Accounts receivable } & 8 & \text { Wages pay able } & 12 \
\hline \text { Inentory } & 16 & \text { Common shares } & 48 \
\hline \text { Machinery } & 42 & \text { Retained earnings appropriated tor bond } & \
\hline & & \text { Sinking fund } & 8 \
\hline & \$ 76 & \text { Retained earnings unappropriated } & 6 \
\hline & & & \$ 76 \
\hline
\end{array}$$ The maximum amount of cash dividends that could be declared on this date is:
A) $6
B) $10
C) $14
D) $76

Quizplus · Accepted Answer

The maximum amount of cash dividends that could be declared is equal to the unappropriated retained earnings, which is $6.

A Corporation Had the Following Account Balances on December 31