"The general assembly of the ABC Public Shareholding Company decided to distribute the net profit of the company JD 320,000. Thebalance of retained earnings on 1/1/2018 is JD 18,000. Compulsory reserve for 2018 is"64000180003200048000

Answered: "The general assembly of the ABC Public…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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"The general assembly of the ABC Public Shareholding Company decided to distribute the net profit of the company JD 320,000. The
balance of retained earnings on 1/1/2018 is JD 18,000. Compulsory reserve for 2018 is"
64000
18000
32000
48000

Expert Solution

Step 1

$Reserves are funds set aside from a company' s income in order to strengthen the company' s financial position in the future and cover losses (if any) . Reserves are transferred after taxes have been paid but before dividends have been paid, whereas retained profits are what is left after dividends have been paid to stockholders . Banks and other depository institutions must retain a certain amount of reserves against their liabilities, according to the Federal Reserve . The marginal reserve requirement is currently set at 10 % of a bank' s demand and checking deposits .$

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