Question

At the beginning of its current fiscal year, Willie Corp's balance sheet showed assets of $12,500 and liabilities of $6,000. During the year, liabilities decreased by $1,000. Net income for the year was $2,600, and net assets at the end of the year were $7,000. There were no changes in paid-in capital during the year. Required: Calculate the dividends, if any, declared during the year. Indicate the financial statement effect. (Enter decreases with a minus sign to indicate a negative financial statement effect.) Stockholders' Equity - Assets $ 12,500 Beginning: Changes: Liabilities $ 6,000 + (1,000) + = Ending:

Answer 1

Beginning assets = $12,500

Beginning liabilities = $6,000

Beginning stockholders' equity = Beginning assets - Beginning liabilities

= 12,500 - 6,000

= $6,500

Ending liabilities = Beginning liabilities - Decrease in liabilities

= 6,000 - 1,000

= $5,000

Ending assets = $7,000

Ending stockholders' equity = Ending assets - Ending liabilities

= 7,000 - 5,000

= $2,000

Ending stockholders' equity = Beginning stockholders' equity + Net income - Dividend

2,000 = 6,500 + 2,600 - Dividend

Dividend = $7,100

	Assets	=	Liabilities	+	PIC	+	RE
Beginning	12,500	=	6,000	+	2,000	+	4,500
Changes	-5,500	=	-1,000	+		+	2,600
		=		+		+	-7,100
Ending	7,000	=	5,000	+	2,000	+	0

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