Question

Dakota Company experienced the following events during 2018: 1. Acquired $25,000 cash from the issue of common stock. 2. Paid $20,000 cash to purchase land. 3. Borrowed $20,000 cash. 4. Provided services for $60,000 cash. 5. Paid $2,000 cash for utilities expense. 6. Paid $40,000 cash for other operating expenses. 7. Paid a $5,000 cash dividend to the stockholders. 8. Determined that the market value of the land purchased in Event 2 is now $25,000. 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

Dakota Company Accounting Equation for Year 2 Stockholders Equity Liabilities Account Titles for Assets Notes Payable Retained Earnings Retained Earnings Event Cash Land Common Stock 5000 Beg. 5000 15000 15000 25000 25000 20000 2 -20000 3 20000 20000 Provided Services 4 60000 60000 Utilities Expense -2000 -2000 -40000 -40000 Operating Expenses Dividend paid -5000 -5000 N/A Totals 43000 35000 20000 30000 28000

Statement of Income For the period ending Year 2 Service Revenue 60000 Less Utilities Expense 2000 40000 42000 Operating Expenses Net Income 18000 Statement of Changes in Stockholders Equity For the period ending Year 2 Beginning Common Stock 5000 Additions 25000 Ending Common Stock 30000 Beginning Retained Earnings 15000 Net Income 18000 Dividends -5000 Ending Retained Earnings Total Stockholders Equity 28000 58000 Statement of Cash flow For the period ending Year 2 Cashflow from Operating Activity 18000 Net Income Adjustments: Increase in Notes Payable 20000 20000 Cash generated from Operating Activity 38000 Cashflow from Investing Activity Land Purchased -20000 Cash used for Investing Activity -20000 Cashflow from Financing Activity Common Stock issued 25000 Dividends paid -5000 Cash generated from Financing Activity 20000 Net Increase in Cash 38000 Beginning Cash Balance Ending Cash Balance 5000 43000

Balance sheet As at Year 2 Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Assets Notes Payable Cash 20000 43000 Land 35000 Stockholders Equity Common Stock 30000 Retained Earnings 28000 58000 78000 Total Liabilities & Equity Total Assets 78000