On December 15, Year 1, the Binghamton Corporation established a retained earnings appropriation of $20,000 for future expansion. The balance of the retained earnings account prior to the transaction was $60,000. At December 31, Year 1, the Corporation had 2,000 shares of $10 par common stock (issued at par) outstanding. The corporate charter indicates 20,000 shares of common stock are authorized and there is no treasury stock.Required:a) Indicate the effect of the appropriation on the financial statements.
b) Prepare the Stockholder's Equity section of the Binghamton Corporation's Balance sheet of December 31, Year 1.
What will be an ideal response?
a)
b)
| Common stock, 20,000 shares authorized, 2,000 | ? | ? |
| shares issued and outstanding | ? | $ 20,000 |
| Retained earnings | ? | ? |
| Appropriated | 20,000 | ? |
| Unappropriated | 40,000 | 60,000 |
| Total Stockholders' Equity | ? | $ 80,000 |
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