The information presented here represents selected data from the December 31, 20
ID: 2484710 • Letter: T
Question
The information presented here represents selected data from the December 31, 2013, balance sheets and income statements for the year then ended for three firms.
Calculate the missing amounts for each firm
The information presented here represents selected data from the December 31, 2013, balance sheets and income statements for the year then ended for three firms.
Required:Calculate the missing amounts for each firm
Firm A Firm B Firm C Total Assets, 12/31/13 $435,000 $520,000 Total Liabilities. 12/31/13 80,000 205,000 Paid-in capital, 12/31/13 186,000 Retained earnings, 12/31/13 186,000 Net income for 2013 68,000 110,000 81,000 Dividens declared and paid during 2013 12,000 28,000 retained earnings, 1/1/13 50,000 124,000Explanation / Answer
Please read the assumptions carefully
Total Assets = Total Liabilities + Paid in Capital + Retained Earnings 12/31/13
Retained Earning 1/1/13 + Net Income for 2013 - Dividend Declared and paid during 2013 = Retained Earnings 12/31/13
Firm A
Retained Earnings 12/31/13 = 50,000 + 68,000 - 12,000 = $106,000
Paid in Capital 12/31/13 = $106,000 (Assumption= Same as Retained Earnings)
Total Assets = 80,000 + 106,000 + 106,000 = $292,000
Note Total Assets and Paid in Capital both are missing and it is not possible to calculate either of the values while any of them is missing and therefore, we are assuming retained earnings equals paid in capital
Firm B
Dividend declared and paid during 2013 = 124,000 +110,000 - 186,000 = $48,000
435,000 = Total Liabilities + 186,000 + 186,000
Total Liabilities = $63,000
Firm C
Note here both opening and closing retained earnings as well as paid in capital is missing, this can be done by two methods. First, by assuming opening Retained Earnings to be NIL, closing retained earnings can be calculated thereby giving us paid in capital
Second, we can again assume that paid in capital equals closing retained earnings, because this closing retained earnings will help us in calculating opening retained earnings.
here, we will apply the second assumption (any of the assumption can be applied, but please do specify)
520,000 = 205,000 + Paid in Capital + Retained Earnings
Paid in Capital + Retained Earnings = $315,000
as per our assumption, Paid in capital = $157,500
Retained Earnings = $157,500
157,500 = Retained Earnings 1/1/13 +81,000 - 28,000
Closing Retained earnings = $104,500
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