A Components of the accounting equation

Assets = Liabilities + Stock + Retained Earnings
Allen $10,000 = $7,500 + $2,000 + $ 500
White $12,000 = $3,000 + $7,200 + $1,800
Required
a. Based on this information alone, can you determine whether White can pay a $2,000 cash dividend? Why or why not?
b. Reconstruct the accounting equation for each 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 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 paid to creditors and how much will be paid to investors?
d. Assume White incurs a $3,500 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 paid to creditors and how much will be paid to investors?

Answer rating: 100% (QA)

a No white cannot pay dividend of 2000 as it has 1800 ... View the full answer