ASSET = LIABILITIES + STOCK + RETAINED EARNINGS ALLEN $10000 - $7500 + $2000 + $
ID: 2465939 • Letter: A
Question
ASSET = LIABILITIES + STOCK + RETAINED EARNINGS ALLEN $10000 - $7500 + $2000 + $500 WHITE $12000 _ $3000 + $7200 + $1800 Required a. Based on this information alone, can determine whether white can pay a $2000 cash dividend? Why or why not? b. Reconstruct the accounting equation for Cash Company using percentages on the right side of the equation instead of dollar values. Which company is more financially stable? Why? c. Assume Allen incurs a $3,500 operating loss. The remaining assess are sold for the value shown on the books, and the cash proceeds are distributed to the creditors and investors. How much money will be payed to creditors and how much money will be payed to investors? d. Assume white incurs a 3500 operating loss. The remaining assets are sold for the value shown on the books, and the cash proceeds are distributed to the creditors and investors. How much money will be payed to creditors and how much money will be payed to investors?
Explanation / Answer
Answer:a No,because Company white retained earnings account has a balance only $1800, they cannot pay a $2000 cash dividend. However there is no information to determine the exact amount of dividend that can be paid. The balance of cash account is necessary.
Answer:c cash is available=10000
Remaining cash available=10000-3500=6500
$6500 money will be payed to creditors . and $0 to investors
Answer:d cash is available=12000
Remaining cash available=12000-3500=8500
$3000 money will be payed to creditors . and $5500 to investors.