Response to the following problem:
The agreement under which Patterson, Inc., issued its long-term debt requires the restriction of $200,000 of the company's retained earnings balance. Total retained earnings is $250,000, and total paid-in capital is $500,000.
Required:
Show how to report stockholders' equity on Patterson's balance sheet, assuming the following:
a. Patterson discloses the restriction in a note. Write the note.
b. Patterson appropriates retained earnings in the amount of the restriction and includes no note in its statements.
c. Patterson's cash balance is $100,000. What is the maximum amount of dividends Patterson can declare?