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AP 11–9 (Appendix 2)

19 August, 2015 - 15:13

The partial shareholders’ equity section of the Enermax Machine Company Limited balance sheet at December 31, 2016 appears below.

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Required:

  1. Why do you think the directors established a restriction for plant expansion on retained earnings?
  2. Assume that the plant expansion was completed by June 30, 2017. What entry would be made to eliminate the restriction?