Question

Dakota Company experienced the following events during 2018:

1. Acquired $15,000 cash from the issue of common stock.

2. Paid $15,000 cash to purchase land.

3. Borrowed $5,000 cash.

4. Provided services for $55,000 cash.

5. Paid $2,000 cash for utilities expense.

6. Paid $45,000 cash for other operating expenses.

7. Paid a $1,000 cash dividend to the stockholders.

8. Determined that the market value of the land purchased in Event 2 is now $16,000.

Required

1. 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.

2. b-1. Prepare an income statement for the 2018 accounting period.

3. b-2. Prepare a statement of changes in equity for the 2018 accounting period.

4. b-3. Prepare a year-end balance sheet for the 2018 accounting period.

5. b-4. Prepare a statement of cash flows for the 2018 accounting period.

6. c. Determine the percentage of assets that were provided by retained earnings. Can you determine the cash in retained earnings?

Dakota Company experienced the following events during 2018: 1. Acquired $15,000 cash from the issue of common stock. 2. Paid $15,000 cash to purchase land. 3. Borrowed $5,000 cash. 4. Provided services for $55,000 cash. 5. Paid $2,000 cash for utilities expense. 6. Paid $45,000 cash for other operating expenses. 7. Paid a $1,000 cash dividend to the stockholders. 8. Determined that the market value of the land purchased in Event 2 is now $16,000. 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

A)

DAKOTA COMPANY
Accounting Equation for 2018
Event	Assets			=	Liabilities	+	Stockholders' Equity			Account titles for Retained Earnings
	Cash	+	Land	=	Notes Payable	+	Common Stock	+	Retained Earnings
Bal. 1/1/2018	$14500	+	10000	=	10000	+	10000	+	4500
1.	15000	+		=		+	15000	+		NA
2.	-15000	+	15000	=		+		+		NA
3.	5000	+		=	5000	+		+		NA
4.	55000	+		=		+		+	55000	Service Revenue
5.	-2000	+		=		+		+	-2000	Utilities expense
6.	-45000	+		=		+		+	-45000	Operating expense
7.	-1000	+		=		+		+	-1000	Dividends
8.		+		=		+		+		NA
Totals	$26500	+	25000	=	15000	+	25000	+	11500

The market value of the land does not have any effect in the accounting equation.

B-1)

DAKOTA COMPANY
Income Statement
For the Year Ended December 31, 2018
Service Revenue	$55000
Utilities expense	-2000
Operating expense	-45000
Net income	$8000

B-2)

DAKOTA COMPANY
Statement of Changes in Stockholders' Equity
For the Year Ended December 31, 2018
Beginning common stock	$10000
Plus: Common stock issued	15000
Ending common stock		$25000
Beginning retained earnings	$4500
Plus: Net income	8000
Less: Dividends	-1000
Ending retained earnings		11500
Total stockholders' equity		$36500

B-3)

DAKOTA COMPANY
Balance Sheet
As of December 31, 2018
Assets
Cash	$26500
Land	25000
Total assets		$51500
Liabilities
Notes payable	15000
Total liabilities		15000
Stockholders' Equity
Common stock	25000
Retained earnings	11500
Total stockholders' equity		36500
Total liabilities and stockholders' equity		$51500

B-4)

DAKOTA COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash flows from operating activities:
Received from customers	$55000
Utilities expenses paid	-2000
Operating expenses paid	-45000
Net cash flow from operating activities		$8000
Cash flows from investing activities:
Purchase of land	-15000
Net cash flow from investing activities		-15000
Cash flows from financing activities
Issuance of common stock	15000
Cash borrowed	5000
Dividend paid	-1000
Net cash flow from financing activities		19000
Net increase in cash (8000-15000+19000)		12000
Add: Beginning cash balance		14500
Ending cash balance		$26500

C) Percentage of assets= Retained earnings*100/Assets

= $11500*100/51500= 22.3%

Can you determine the cash in retained earnings?

No, cash cannot be determined from the retained earnings.