Question

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Dakota Company experienced the following events during Year 2. 1. Acquired $20,000 cash from the issue of common stock. 2. Paid $25,000 cash to purchase land. 3. Borrowed $10,000 cash. 4. Provided services for $50,000 cash. 5. Paid $1,500 cash for utilities expense. 6. Paid $35,500 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 $28,000. Required a. The January 1, Year 2, general ledger account balances are shown in the following accounting equation. Record the eight events i 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. Select "NA" if there is no effect on the "Account Titles for Retained Earnings".) Event Balance 1/1/Year 2 + + Assets Cash + 17,500 + 20,000 + (25,000) + 10,000+ 50,000 + (1,500) + (35,000) + (5,000) DAKOTA COMPANY Accounting Equation for Year 2 = Liabilities + Stockholders' Equity Account Titles for Notes , Common . Retained Land Retained Earnings = Payable Stock * Earnings 22,500 = 25,000 + 10,000 + 5,000 20,000 + NA 25,000 + NA = 10,000 50,000 Service revenue (1,500) Utilities expense (35,000) Operating expense (5,000) Dividends ΕΝΑ 47,500 = 35,000 + 30,000 13,500 + + NA 4. + + + + 6. + + + + + + + Totals 31,000 + +

Answer 1

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Dakota Company
Answer a
Event No.			Balance Sheet
	Assets				Liabilities		Stockholder's Equity			Account title for
	Cash	+	Land	=	Notes Pay	+	Common Stock	+	Retained Earnings	Retained Earnings
Balance 1/1/2016	17,500.00	+	22,500.00	=	25,000.00	+	10,000.00	+	5,000.00
1	20,000.00	+	-	=	-	+	20,000.00	+	-	NA
2	(25,000.00)	+	25,000.00	=	-	+	-	+	-	NA
3	10,000.00	+	-	=	10,000.00	+	-	+	-	NA
4	50,000.00	+	-	=	-	+	-	+	50,000.00	Service Revenue
5	(1,500.00)	+	-	=	-	+	-	+	(1,500.00)	Utilities expense
6	(35,500.00)	+	-	=	-	+	-	+	(35,500.00)	Operating Expenses
7	(5,000.00)	+	-	=	-	+	-	+	(5,000.00)	Dividend Paid
8		+	-	=	-	+	-	+	-	NA
	30,500.00	+	47,500.00	=	35,000.00	+	30,000.00	+	13,000.00

Answer b-1
Income Statement	Amount $
Services revenue	50,000.00
Utilities expense	1,500.00
Other operating expense	35,500.00
Net Income	13,000.00
Answer b-2
Statement of changes in equity	Amount $	Amount $
Beginning common stock	10,000.00
Plus: Common stock issued	20,000.00
Ending common stock		30,000.00
Beginning Retained earnings	5,000.00
Plus: Net Income	13,000.00
Less: Dividends	5,000.00
Ending Retained earnings		13,000.00
Total stockholder's equity		43,000.00
Answer b-3
Balance Sheet
Assets	Amount $
Cash	30,500.00
Land	47,500.00
Total Assets	78,000.00
Liabilities
Notes Payable	35,000.00
Total Liabilities	35,000.00
Stockholder's equity
Common Stock	30,000.00
Retained Earnings	13,000.00
Total Stockholder's equity	43,000.00
Total Liabilities & Stockholder's equity	78,000.00
Answer b-4
	Amount $	Amount $
Cash flows from operating activities
Services provided in cash	50,000.00
Utilities expense	(1,500.00)
Other operating expense	(35,500.00)
Cash flows from operating activities		13,000.00
Cash Flow from Investing Activities
Land purchased	(25,000.00)
Cash Flow from Investing Activities		(25,000.00)
Cash Flow from Financing Activities
Common stock issued during the year	20,000.00
Borrowings	10,000.00
Dividends paid	(5,000.00)
Net Cash inflow form Financing Activities		25,000.00
Net Increase in cash		13,000.00
Add: Beginning Cash Balance		17,500.00
Ending cash Balance		30,500.00
Answer c-1	Amount $
Ending Retained earnings	13,000.00
Total Assets	78,000.00
% of assets provided by Retained earnings	16.7%
Answer c-2
Yes retained earnings balance reflect the amount of cash that company can pays as dividends.
Answer d
The largest cash dividend Dakota could pay is the ending balance of retained Earnings which is $ 13,000.