Packard Company engaged in the following transactions during Year 1, its first year of operations: (Assume all transactions are cash transactions.)
During Year 2, Packard engaged in the following transactions:
(Assume all transactions are cash transactions.)
QUESTIONS:
What is the amount of total stockholders’ equity that will be reported on Packard’s balance sheet at the end of Year 1?
What is the after-closing amount of retained earnings that will be reported on Packard’s balance sheet at the end of Year 2? (Assume that closing entries have been)
What is the amount of assets that will be reported on Packard’s balance sheet at the end of Year 2?
1. Total stockholders' equity:
Year 1 | Year 2 | |
Issue of common stock | $1,150 | $525 |
Revenues earned | 800 | 950 |
Expenses paid/incurred | (290) | (440) |
Dividend paid | (90) | (140) |
Total stockholders' equity | $1,570 | $895 |
Total stockholders equity reported at the end of Year 1 = $1,570
2. Retained earnings at the end of Year 2 :
Year 1 | Year 2 | |
Beginning balance | $0 | $420 |
Add: Revenue earned | 800 | 950 |
Less: Expenses paid/incurred | (290) | (440) |
Less: Dividend paid | (90) | (140) |
Ending balance | $420 | $790 |
Retained earnings at the end of Year 2 = $790
3. Assets reported at the end of Year 2
Year 1 | Year 2 | |
Beginning cash balance | $0 | $2,190 |
Issue of common stock | 1,150 | 525 |
Borrowings/repayments from/to bank | 620 | (360) |
Revenue earned | 800 | 950 |
Expenses paid | (290) | (440) |
Dividends paid | (90) | (140) |
Ending cash balance | $2,190 | $2,725 |
Assets reported at the end of Year 2 = $2,725 (Ending cash balance)
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