FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:On January 1, Year 2, the following information was drawn from the accounting records of Carter Company: cash of $475; land of
$2,625; notes payable of $775; and common stock of $1,705.
Required
a. Determine the amount of retained earnings as of January 1, Year 2.
b. After looking at the amount of retained earnings, the chief executive officer (CEO) wants to pay a $575 cash dividend to the
stockholders. Can the company pay this dividend?
c. As of January 1, Year 2, what percentage of the assets were acquired from creditors?
d. As of January 1, Year 2, what percentage of the assets were acquired from investors?
e. As of January 1, Year 2, what percentage of the assets were acquired from retained earnings?
f. Create an accounting equation using percentages instead of dollar amounts on the right side of the equation.
g. During Year 2, Carter Company earned cash revenue of $720, paid cash expenses of $410, and paid a cash dividend of $61.
(Hint. It is helpful to record these events under an accounting equation before preparing the statements.)
g-1. Prepare an income statement dated December 31, Year 2.
g-2. Prepare a statement of changes in stockholders' equity dated December 31, Year 2.
g-3. Prepare a balance sheet dated December 31, Year 2.
g-4. Prepare a statement of cash flows dated December 31, Year 2.
j. What is the balance in the Revenue account on January 1, Year 3?
Complete this question by entering your answers in the tabs below.
Req A and B Req C to E
Beginning common stock
Ending common stock
Beginning retained earnings
Req F
Ending retained earnings
Total stockholders' equity
Req G
Req G1
Prepare a statement of changes in stockholders' equity dated December 31, Year 2.
CARTER COMPANY
Statement of Changes in Stockholders' Equity
For the Year Ended December 31, Year 2
Req G2
Req G3
Req G4
Req J
Expert Solution
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Step 1
a.
| Assets: | |
| Cash | $475 |
| Land | $2,625 |
| Total Assets=475+2625 | $3,100 |
| Liabilities | |
| Notes Payable | $775 |
| Shareholders Equity: | |
| Common Stock | $1,705 |
| Retained Earnings | ? |
Assets=Liabilities+Shareholders Equity
3100=775+1705+Retained Earnings
Retained Earnings=3100-775-1705= $620
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