Question

On January 1, 2016, the following information was drawn from the accounting records of Carter Company: cash of $400; land of $2,400; notes payable of $700; and common stock of $1,540. Required a. Determine the amount of retained earnings as of January 1, 2016. b. After looking at the amount of retained earnings, the chief executive officer (CEO) wants to pay a $500 cash dividend to the stockholders. Can the company pay this dividend? Yes No c. As of January 1, 2016, what percent of the assets were acquired from creditors? (Round your answer to 1 decimal place.) d. As of January 1, 2016, what percent of the assets were acquired from investors? (Round your answer to 1 decimal place.) e. As of January 1, 2016, what percent of the assets were acquired from retained earnings? (Round your answer to 1 decimal place.) f. Create an accounting equation using percentages instead of dollar amounts on the right side of the equation. (Round your percentage answers to 1 decimal place.) g. During 2016, Carter Company earned cash revenue of $660, paid cash expenses of $380, and paid a cash dividend of $58. (Hint: It is helpful to record these events under an accounting equation before preparing the statements.) (Enter any decreases to account balances with a minus sign. Select "NA" if there is no effect on the "Account Titles for Retained Earnings".) g-1. Prepare an income statement dated December 31, 2016. g-2. Prepare a statement of changes in stockholders’ equity dated December 31, 2016. g-3. Prepare a balance sheet dated December 31, 2016. g-4. Prepare a statement of cash flows dated December 31, 2016. (Amounts to be deducted should be indicated with a minus sign.) j. What is the balance in the Revenue account on January 1, 2016?

Answer 1

Note: There are more than 4 parts of this question. So as per rule I am answering first 4 parts of this question.

(a). Amount of retained earnings as of January 1, 2016;

Retained earnings = (Total assets – notes payable – common stock)

($400 + $2400) – ($700 + $1540) = $560

(b).

Answer is (NO).

As company has only cash balance of $400 so can not pay a $500 cash dividend to the stockholders.

(c). What percent of the assets were acquired from creditors?

Total assets ($400 + $2400) = $2800

Note payable = $700

Percent of the assets were acquired from creditors ($700 * 100 / $2800) = 25%

(d). What percent of the assets were acquired from investors?

Total assets ($400 + $2400) = $2800

Common stock = $1540

Percent of the assets were acquired from investors ($1540 * 100 / $2800) = 55%