Homework Answers
Solution:
Calculation of Retained earnings at the end of Year 2 :
As per the Information given in the question we have
Retained earnings balance at the end of Year 1 = 45.0 ; Net Income of Year 2 = 49.0 ;
Dividends of Year 2 = 30.0
Thus we have Retained Earnings balance of Year 2 = Retained earnings balance at the end of Year 1 + Net Income of Year 2 - Dividends of Year 2
= 45.0 + 49.0 – 30.0= 64.0
Thus the Retained Earnings balance of Year 2 = 64.0
Calculation of Total Assets:
As per the basic accounting equation
Total Assets = Liabilities + Stock holder’s equity
= Liabilities + Common Stock + Retained earnings
As per the Information given in the question with respect to Year 2 we have
Liabilities = Payables + Debt = 20.0 + 30.0 = 50.0
Common Stock = 15.0 ; Retained earnings = 64.0
Applying the above information in the basic accounting equation we have total assets as
= 50.0 + 15.0 + 64.0
= 129.0
Thus Total Assets of Year 2 = 129.0
Calculation of Cash Balance of Year 2:
As per the information available in the question we have
Cash + Receivables + Net property plant and equipment = Total Assets
We know that
Receivables = 40.0 ; Net property plant and equipment = 50.0 ; Total Assets = 129.0
Applying the above information in the Total Assets equation we have
Cash + 40.0 + 50.0 = 129.0
Cash + 90.0 = 129.0
Cash = 129.0 – 90.0
Cash = 39.0
Thus the Cash Balance of Year 2 = 39.0
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