Effects of revenue, expense, and dividend events
Chicago Company was started on January 1,2011. During 2011, the company completed three accounting events: (1) earned cash revenues of $12,500, (2) paid cash expenses of $6,400, and (3) paid a $1,000 cash dividend to the owner. These were the only events that affected the company during 2011.
Required
a. Write an accounting equation, and record the effects of each accounting event under the appropriate general ledger account headings.
b. Prepare an income statement for the 2011 accounting period and a balance sheet at the end of 2011 for Chicago Company.
c. What is the balance in the Retained Earnings account immediately after the cash revenue is recognized?
d. What is the balance in the Retained Earnings account after the closing process is complete?
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