Question

Dakota Company experienced the following events during Year 2 20 points 1. Acquired $15,000 cash from the issue of common stock. 2. Paid $25,000 cash to purchase land. 3. Borrowed $5,000 cash. 4. Provided services for $50,000 cash. 5. Paid $2,000 cash for utilities expense. 6. Paid $37,500 cash for other operating expenses. 7. Paid a $2,500 cash dividend to the stockholders. 8. Determined that the market value of the land purchased in Event 2 is now $29,000. Skipped eBook Required a. The January 1, Year 2, 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. (Enter any decreases to account balances with a minus sign. Not all cells in the "Accounts Titles for Retained Earnings" column may require an input - leave cells blank if there is no corresponding Retained Earnings input needed.) Hint References Assets Event DAKOTA COMPANY Accounting Equation for Year 2 Liabilities + + Stockholders' Equity Common Notes Retained Land Payable Stock Earnings 25,000 = 0 + 15.000 + 17.500 + 15,000+ Account Titles for Retained Earnings Cash + Balance 1/1/Year 2 7,500 + 15,000 + 1. 1 2. + + + 3. + = + + 4. + + 1 + 5. + + 6. + + + + 7. + + + 8. + + Totals 22.500 + 25,000 = 0 + 30.000 + 17.500

Answer 1

a. Accounting Equation for Year 2 -

Assets Events DAKOTA COMPANY Accounting Equation for Year 2 Liabilities Stockholder's Equity Notes Common Retained Payable Stock Earnings $ $ 15,000 $ 17,500 $ 15,000 Account Titles for Retained Earnings Cash + Land + + $ 25,000 $ 25,000 $ 5,000 Balance $ 7,500 1 $ 15,000 2 $125,000) 3 $ 5,000 4 $ 50,000 5 $ (2,000) 6 $(37,500) 7 $ (2,500) 8 No Entry $ 50,000 Service Revenue $ (2,000) Utilities Expense $(37,500) Other Operating Expense $ (2,500) Dividend $ 10,500 + $ 50,000 $ 5,000 + $ 30,000 + $ 25,500

b.1. Income Statement -

$ 50,000 DAKOTA COMPANY Income Statement For the Year Ended December 31, Year 2 Service Revenue Expenses: Utilities Expense $ 2,000 Other Operating Expense $ 37,500 Total Expenses $ 39,500 Net Income $ 10,500

b.2. Statement of Changes in the Stockholder's Equity -

DAKOTA COMPANY Statement of Changes in the Stockholder's Equity For the Year Ended December 31, Year 2 Beginning Common Stock $ 15,000 Issued of Common Stock $ 15,000 Ending Common Stock $ 30,000 Beginning Retained Earnings $ 17,500 (+) Net Income $ 10,500 (-) Dividends $ 2,500) Ending Retained Earnings $ 25,500 Total Stockholder's Equity $ 55,500

b.3. Balance Sheet -

DAKOTA COMPANY Balance Sheet As of December 31, Year 2 Assets Cash Land $ 10,500 $ 50,000 Total Assets $ 60,500 Liabilities Notes Payable $ 5,000 Stockholder's Equity Common Stock Retained Earnings Total Stockholder's Equity $ 30,000 $ 25,500 $ 55,500 Total Liabilities and Stockholder's Equity $ 60,500

b.4. Statement of Cash Flows -

DAKOTA COMPANY Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flow from Operating Activities: Cash Received from Customers $ 50,000 Cash Paid to Operating Expenses $(39,500) Net Cash flow from Operating Activities $ 10,500 Cash flow from Investing Activities: Purchase of Land $(25,000) Net Cash flow from Investing Activities $(25,000) Cash flow from Financing Activities: Issue of Common Stock Issue of Notes Payable Dividend Paid $ 15,000 $ 5,000 $ (2,500) Net Cash flow from Financing Activities $ 17,500 Change In Cash $ 3,000 Cash at the Beginning Cash at the End $ 7,500 $ 10,500

c.1 Percentage of Assets - Retained Earnings / Total Assets = $25,500 / $60,500 = 42.15%

c.2 Yes, Retained Earnings accounts reflect the balance available to pay the dividend.

d. Total Dividend Company can pay $10,500. as the availability of Cash.