As of December 31, 2016, Big Horn Company had total assets of $100,000, total liabilities of $30,000,
Question:
As of December 31, 2016, Big Horn Company had total assets of $100,000, total liabilities of $30,000, and common stock of $50,000. The company’s 2016 income statement contained revenue of $16,000 and expenses of $11,000. The 2016 statement of changes in stockholders’ equity stated that $2,000 of dividends were paid to investors.
Required
a. Determine the before-closing balance in the Retained Earnings account on December 31, 2016.
b. Determine the after-closing balance in the Retained Earnings account on December 31, 2016.
c. Determine the before-closing balances in the Revenue, Expense, and Dividend accounts on December 31, 2016.
d. Determine the after-closing balances in the Revenue, Expense, and Dividend accounts on December 31, 2016.
e. Explain the difference between common stock and retained earnings.
f. On January 1, 2017, Big Horn Company raised $40,000 by issuing additional common stock. Immediately after the additional capital was raised. Big Horn reported total equity of $110,000. Are the stockholders of Big Horn in a better financial position than they were on December 31, 2016?
Common StockCommon stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Step by Step Answer:
a Big Horn Company Accounting Equation as of December 31 2016 Assets Liabilities Common Stock Retain...View the full answer
Fundamental Financial Accounting Concepts
ISBN: 978-0078025907
9th edition
Authors: Thomas Edmonds, Christopher Edmonds
