The financial condition of White Inc. is expressed in the following accounting equation: Assets = Liabilities +

Question:

The financial condition of White Inc. is expressed in the following accounting equation:

Assets = Liabilities + Common stock + Retained earnings

$800 Cash + $9,200 Land = $7,000 + $2,000 + $1,000

Required

a. Are dividends paid to creditors or investors? Explain why.

b. How much cash is in the Retained Earnings account?

c. Determine the maximum dividend White can pay.

d. If the obligation to creditors is due, can White repay the loan? Why or why not?

e. Suppose the land sinks into the sea as a result of an earthquake and a resulting tsunami. The business is then liquidated. How much cash will creditors receive? How much cash will investors receive?

Common Stock
Common 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...