Use the three-step process in the aicpa conceptual framework to assess whether janes' independence has been impaired. describe h
ow each of the situations might threaten janes' independence from the auto dealership. identify a safeguard that janes' firm could impose that would eliminate or mitigate the threat of each situation to janes' independence. assuming no safeguards are in place and janes accepts the offer or gift in each situation, discuss whether she has violated the rules of conduct. discuss what janes should do in each situation.
It will reduce the amount of dividiends it can pay.
Explanation:
As there is an amount of the retained earnings that is restricted the company cannot use them to pay up neither stock or cash dividends in the future.
The retained earnings are used to pay dividends but also, are part of the equity of the firm thus the RE count to the capital structure of the company . Loans can be obtained with better rates if thecapital structure is more based on equiy than in liabilities thus, the board of directors is planning ahead the future plant exansion avoiding to use cash and deteriorate his capital structure to pay up dividends.
