Question

Prat Corp. started the 2018 accounting period with $34,000 of assets (all cash), $14,000 of liabilities, and $19,000 of common stock. During the year, the Retained Earnings account increased by $18,050. The bookkeeper reported that Prat paid cash expenses of $33,000 and paid a $3,400 cash dividend to the stockholders, but she could not find a record of the amount of cash that Prat received for performing services. Prat also paid $8,500 cash to reduce the liability owed to the bank, and the business acquired $7,700 of additional cash from the issue of common stock.

2. Determine the percentage of total assets that were provided by creditors, investors, and earnings. (Round your answers to 2 decimal places.)

Answer 1

Answer-To determine the percentage of total assets that were provided by creditors, investors and earnings, first of all we have to prepare Accounting Equation though it is not required in the problem but it will be helpful to determine the amount of common stock and revenue earned as of beginning of the year:-

Prat Corp.

Accounting Equation

	Assets	=	Liabilities	+	Stockholders' Equity
	Cash		Notes Payable		Common Stock	Retained Earnings
Beginning Balance	$34,000		$14,000		$19,000	1,000
Expenses Paid	($33,000)					($33,000)
Dividend Paid	($3,400)					($3,400)
Liability Paid	($8,500)		($8,500)
Issued Stock	$7,700				$7,700
Revenue	$54,450					$54,450
Closing Balance	$51,250		$5,500		$26,700	$19,050

the percentage of total assets that were provided by creditors= Liabilities/ Assets

= $5,500/ $51,250

=10.73%

the percentage of total assets that were provided by investors= Common Stock / Assets

=$26,700/ $51,250

= 52.10%

the percentage of total assets that were provided by earnings = Earnings / Assets

=$19,050/ $51,250

=37.17%0