Question

El-19 Dakola Company experienced the following events during 2018 1. Acquired $30,000 cash from the issue of common stock. 2. Paid $12.000 cash to purchase land. 3. Borrowed $10.000 cash. 4. Provided services for $20,000 cash. 5. Paid $1.000 cash for utilities expense. 6. Paid $15.000 for other operating expenses. 7. Paid a $2.000 cash dividend to the stockholders. 8. Determined that the market value of the land purchased in Event 2 is now $12,700. (a) The January 1, 2018. general ledger account balances are shown in the following accounting equation. Record the eight events in the appropriate general ledger account. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide the appropriate title for these accounts in the last column of the table. b) Prepare an income statement, statement of changes in equity, year-end balance sheet and statement of cash flow for the 2018 accounting period. c) Determine the percentage of assets that were provided by retained earnings. Round to three decimal places. How much cash is in the retained earnings account? fo Account titles for RE Dakota Company Accounting Equation for 2018 Assets = Liabilities + Notes Cash Land Payable $2.000 $12.000 $0 Stockholders'Equity Common Retained Stock Earnings $6.000 $8,000 Balance 1/1/2018 1. Issue stock 2. Purchased land 3. Borrowed cash 4. Provided services 5. Paid utilities expense 6. Paid for operating expenses 7. Paid dividends 8. Mkt value of land increased

Answer 1

Solution:

Dakota Company                                        Accounting Equation for 2018                 (Amount in $)									Accounts Title for RE
	Assets		=	Liabilities	+	Shareholders’ Equity
	Cash	Land	=	Notes Payable	+	Common Stock	+	Retained Earnings
Balance 1/1/2018	2,000	12,000		$0		6,000		8,000
Issue Stock	30,000	0		0		30,000		0	Shareholders’ Equity
Purchased Land	(12,000)	12,000		0		0		0	Fixed Asset
Borrowed Cash	10,000	0		10,000		0		0	Liability
Provided Services	20,000	0		0		0		20,000	Revenue
Paid utilities expense	(1,000)	0		0		0		(1,000)	Operating Expense
Paid for operating expense	(15,000)	0		0		0		(15,000)	Operating Expense
Paid dividends	(2,000)	0		0		0		(2,000)	Shareholders’ Equity
Mkt value of land increased	0	0		0		0		0	Not recorded due to Cost Concept
Grand Total	32,000	24,000	=	10,000	+	36,000	+	10,000

Income Statement

REVENUES Service Revenue EXPENSES Utilities Expense Operating Expense NET INCOME	$ 20,000	20,000 16,000
	1,000 15,000
		4,000

BALANCE SHEET

ASSETS Current Assets Cash Fixed Assets Land LIABILITY AND OWNER’S EQUITY Liabilities Notes Payable Owner’s Equity Common Stock Retained Earnings	$ 32,000 24,000
	56,000
	10,000 36,000 10,000
	56,000

CASH FLOW STATEMENT

Particulars		$
Cash flow from Operating Activities: Net Profit during the year Add:     Dividend Paid             Cash flow from Investing Activities: Purchase of Land Cash flow from Financing Activities: Issue of Common stock Borrowed fund Dividend Paid Net increase in cash Add:     Opening balance of Cash                          Closing Balance of Cash	2,000 2,000	4,000 (12,000) 38,000
	30,000 10,000 (2,000)
		30,000 2,000
		32,000

Statement of Changes in Shareholders’ Equity

For the year ended 31 December, 2018

Particulars	Common Stock	Retained Earnings	Total
Balance as at 1/1/2018	6,000	8,000	14,000
Issue of new shares	30,000	-	30,000
Net Income	-	4,000	4,000
Dividends	-	(2,000)	(2,000)
Balance as at 31/12/2018	36,000	10,000	46,000

c) Determination of percentage of assets that were provided by retained earnings:

                  = Retained Earnings/Total Assets *100

                  = 17.857%