QUESTION 2 Packard Company engaged in the following transactions during Year 1,
ID: 2329173 • Letter: Q
Question
QUESTION 2 Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1) Acquired $950 cash from the issue of common stock. 2) Borrowed $420 from a bank. 3) Earned $650 of revenues cash. 4) Paid expenses of $250. 5) Paid a $50 dividend. During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.) 1) Issued an additional $325 of common stock. 2) Repaid $220 of its debt to the bank. 3) Earned revenues of $750 cash. 4) Incurred expenses of $360. 5) Paid dividends of $100. The amount of total equity on Packard’s balance sheet at the end of Year 1 is: $1,350. $900. $250. $1,300.
Explanation / Answer
Equity at the end of the year 1 = Equity at the begining of the year + Retained earnings
= 950 + 350
= $1,300
Hence,correct option is (d)
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Revenues 650 Less: expenses -250 Net income 400 Less: Dividend paid - 50 Retained earnings 350