Question

At the beginning of its current fiscal year, Willie Corp.'s balance sheet showed assets of $14,400 and liabilities of $6,000. During the year, liabilities decreased by $1,300. Net income for the year was $3,200, and net assets at the end of the year were $8,900. 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.) Assets = $ 14,400 = Stockholders' Equity Liabilities + PIC + RE $ 6,000 + $ 0+ (1,300) + Beginning: Changes: - Dividends + Net income Ending:

Answer 1

Assets = Liabilities +PIC+RE

Beginning $ 14,400 = $ 6,000 + 0 + $ 8,400

Changes $ (5,500) =$ (1,300)+ 0 + ($7,400) Dividends (Balancing figure)

$3,200 Net income

Ending $ 8,900 =$ 4,700 + 0 + $ 4,200

Explanation:

As Assets is combination of liabilities PIC and RE , in the beginning RE is figured out at 8,400 by subtracting assets minus liabilities and PIC (14,400 - 6,000).

After that changes in assets is figured out by (14,400 - 8,900) which is 5,500 .

Now ending equity is figured out by subtracting again the assets from liabilities = 8,900 - 4,700 = 4,200

This 4,200 is, the closing balance which comprises of opening - changes

Therefore = 8,400 - 4,200 = 4,200

This changes comprises of dividend as well as net income. As the changes is in negative because of reduction in ending balance , dividend paid will be = 3,200 + 4,200 = $ 7,400.

Therefore dividend paid = $ 7,400.