As of December 31, Year 1, Moss Company had total cash of $195,000, notes payable of $90,500,

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As of December 31, Year 1, Moss Company had total cash of $195,000, notes payable of $90,500, and common stock of $84,500. During Year 2, Moss earned $42,000 of cash revenue, paid $24,000 for cash expenses, and paid a $3,000 cash dividend to the stockholders.


Required
a. Determine the amount of retained earnings as of December 31, Year 1.
b. Create an accounting equation and record the beginning account balances under the appropriate elements.
c. Record the revenue, expense, and dividend events under the appropriate elements of the accounting equation created in Requirement b.
d. Prove the equality of the accounting equation as of December 31, Year 2.
e. Identify the beginning and ending balances in the Cash and Common Stock accounts. Explain why the beginning and ending balances in the Cash account are different but the beginning and ending balances in the Common Stock account remain the same.

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...
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Introductory Financial Accounting for Business

ISBN: 978-1260299441

1st edition

Authors: Thomas Edmonds, Christopher Edmonds

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