Question

LO 3,4 E1-22A. (Learning Objectives 3, 4: Apply the accounting equation; evaluate business operations) Collinswood Company's comparative balance sheet at January 31, 2019, and 2018, reports the following (in millions): 2019 $77 25 2018 $47 19 Total assets Total liabilities Requirements The following are three situations related to Collinswood Company's issuance of stock and dec- laration and payment of dividends during the year ended January 31, 2019. For each situation, use the accounting equation and what you know from the chapter about stockholders' equity, common stock, and retained earnings to calculate the amount of Collinswood's net income or net loss during the year ended January 31, 2019. 1. Collinswood issued $11 million of stock and declared no dividends. 2. Collinswood issued no stock but declared dividends of $20 million. 3. Collinswood issued $15 million of stock and declared dividends of $75 million.

Answer 1

Accounting Equation as follows:

Assets = Liabilities + Stockholders' Equity

Compute stockholders' equity at year-end as follows:

Stockholders' Equity at year End
	2019	2018
Assets	$77	$47
Less: Liabilities	($25)	($19)
Equity at the end	$52	$28

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Analyze the situation as given below:

	Situation #1	Situation #2	Situation #3
Total stockholders' equity, January 31, 2018	$28	$28	$28
Add: Issuance of stock	$11	$0	$15
Net Income	$13	$44	$84
Less: Dividends	$0	($20)	($75)
Net Loss	$0	$0	$0
Total stockholders' equity, January 31, 2019	$52	$52	$52