Question

Dakota Company experienced the following events during 2018: 1. Acquired $20,000 cash from the issue of common stock. 2. Pald $25,000 cash to purchase land. 3. Borrowed $10,000 cash. 4. Provided services for $42,500 cash. 5. Paid $1,500 cash for utilities expense. 6. Pald $30,000 cash for other operating expenses. 7. Pald a $3,000 cash dividend to the stockholders. 8. Determined that the market value of the land purchased in Event 2 is now $27,500. Required 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 accounts. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide the appropriate titles for these accounts in the last column of the table. The first event is shown as an example, b-1. Prepare an income statement for the 2018 accounting period. b-2. Prepare a statement of changes in equity for the 2018 accounting period, b-3. Prepare a year-end balance sheet for the 2018 accounting period. b-4. Prepare a statement of cash flows for the 2018 accounting period. c. Determine the percentage of assets that were provided by retained earnings. Can you determine the cash in retained earnings?

Answer 1

Dakota Company Balance Sheet Assets Liabilties Equity Events Cash Land = Notes Payable + Common Stock + Retained Earnings Account title for Retained Earnings Bal 1/1/2016 $ 10,000 $ 15,000 = $ + $ 8,000 + $ 17,000 $ 20,000 + $ 20,000 + $(25,000) $ 25,000 = $ 10,000 = $ 10,000 + $ 42,500 42,500 Service Revenue $ (1,500) (1,500) Utilties Expense $(30,000) (30,000) Other Operating Expense $ (3,000) (3,000) Dividends + + + + + + + + + + + + Totals $ 23,000 $ 40,000 = $ 10,000 + $ 28,000 + $ 25,000 Note Under US GAAP, fixed assets cannot be revalued upwards, so no entry for last event 8

42,500 Dakota Company Income Statement For the Year Ended Dec 31 Service Revenue Expenses Utilties Expense Other Operating Expense Total Expenses 1,500 30,000 31,500 Net Income 11,000 Statement of Stockholders Equity For the Year Ended Dec 31 Beginning common stock Issue of common stock Ending common stock 8,000 20,000 28,000 17,000 Beginning retained earnings Net Income Less Dividends Ending retained earnings 11,000 (3,000) 25,000

Dakota Company Balance Sheet As of Dec 31 Assets Cash Land Total Assets 23,000 40,000 63,000 Liabilities & Stockholders Equity Liabilities Notes Payable Total Liabilties 10,000 10,000 Stockholders Equity Common Stock Retained earnings Total Stockholders Equity 28,000 25,000 53,000 Total Liabilities & Stockholders Equity 63,000 Percentage of Assets provided by RE Retained Earnings/Total Assets = 25,000/ 63,000 Percentage of Assets provided by RE 39.7% Can you determine cash in RE No

Dakota Company Cashflow Statement Cash flows from Operating Activities Cash received for services provided Cash paid for utilties Cash paid for other operating expenses Net Cash Flow from Operating Activities 42,500 (1,500) (30,000) 11,000 Cash flows from Investing Activities Cash paid to purchase land Net Cash Flow from Investing Activities (25,000) (25,000) 20,000 10,000 (3,000) Cash flows from Financing Activities Cash receipts from stock issue Cash receipts from loan Cash payments for dividends Net Cash Flow from Financing Activities Net Increase in Cash Beginning Cash Balance Ending Cash Balance 27,000 13,000 10,000 23,000

Dakota Company Cashflow Statement Indirect method 11,000 Cash flows from from Operating Activities Net income Adjustments to reconcile net income to operating cash Depreciation expense Changes in Working Capital Net Cash Provided/(Used) by Operating Activities 11,000 Cash flows from from Investing Activities Purchase of Land Net Cash Provided/(Used) by Investing Activities (25,000) (25,000) Cash flows from from Financing Activities Proceeds from issue of common stock Proceeds from issue of note Dividends paid Net Cash Provided/(Used) by Financing Activities 20,000 10,000 (3,000) 27,000 Net Change in Cash Cash at Beginning of Period Cash at End of Period 13,000 10,000 23,000