a. Conrad paid no dividends during the year and invested the funds in marketable
ID: 451662 • Letter: A
Question
a. Conrad paid no dividends during the year and invested the funds in marketable securities.
b. Conrad paid diidends totaling $505,000 and used the balance of the net income to retire (pay off) long-term debt.
c. Con rad paid dividends totaling $505,000 and invested the balance of the net income in building a new hangar.
d. Conrad paid out all $1,366,000 as dividends to it's stockholders.
Conrad Air Inc. Balance Sheet as of December 31, 2015
Assets Liabililities and Stockholders' Equity
Cash $125,000 Accounts payable $70,000
Marketable Securities 32,000 Short-term notes 60,000
Accounts receivable 49,000 Current Liabilities $130,000
Inventories 133,000 Long-term debt 2,704,000
Current assets $339,000 Total liabilities $2,834,000
Equipment 2,964,000 Common Stock 495,000
Buildings 1,610,000 Retained Earnings 1,584,000
Fixed assets $4,574,000 Stockholders' Equity $2,079,000
Total Assets $4,913,000 Total liabilities and equity $4,913,000
Please show me how you get all of the answers. The balance sheet gets a little messed up when I submit this so I tried attaching pictures of the actual one.
Explanation / Answer
Assets Amount Liabililities and Stockholders' Equity Amount Cash $125,000 Accounts Payable $70,000 Marketable Securities $32,000 Short-term Notes $60,000 Accounts Receivable $49,000 Current Liabilities $130,000 Inventories $133,000 Long-term debt $2,704,000 Current Assets $339,000 Total Liabilities $2,834,000 Equipment $2,964,000 Common Stock $495,000 Buildings $1,610,000 Retained Earnings $1,584,000 Fixed Assets $4,574,000 Stockholders' Equity $2,079,000 Total Assets $4,913,000 Total Liabilities and Equity $4,913,000 a. Conrad paid no dividends during the year and invested the funds in marketable securities. Since the funds remain with the company, retained earnings and marketable securities increase by $1,366,000 Assets Amount Liabililities and Stockholders' Equity Amount Cash (a) $125,000 Accounts Payable (a) $70,000 Marketable Securities (b) $1,398,000 Short-term Notes (b) $60,000 Accounts Receivable (c ) $49,000 Current Liabilities (c = a+b) $130,000 Inventories (d) $133,000 Long-term debt (d) $2,704,000 Current Assets (e = a+b+c+d) $1,705,000 Total Liabilities (e = c+d) $2,834,000 Equipment (f) $2,964,000 Common Stock (f) $495,000 Buildings (g) $1,610,000 Retained Earnings (g) $2,950,000 Fixed Assets (h= f + g) $4,574,000 Stockholders' Equity (h = f+g) $3,445,000 Total Assets (e+h) $6,279,000 Total Liabilities and Equity (e+h) $6,279,000 b. Conrad paid dividends totaling $505,000 and used the balance of the net income to retire (pay off) long-term debt. Net Income $1,366,000 Retained Earning Calculation Less: Amount paid as dividend $505,000 Opening $1,584,000 Balance $861,000 Add: Net Income $1,366,000 Long Term Debt Retired (a) $861,000 $2,950,000 Opening Debt (b) $2,704,000 Less: Paid as Dividend $505,000 Balance in Debt (b-a) $1,843,000 Closing $2,445,000 Assets Amount Liabililities and Stockholders' Equity Amount Cash (a) $125,000 Accounts Payable (a) $70,000 Marketable Securities (b) $32,000 Short-term Notes (b) $60,000 Accounts Receivable (c ) $49,000 Current Liabilities (c = a+b) $130,000 Inventories (d) $133,000 Long-term debt (d) $1,843,000 Current Assets (e = a+b+c+d) $339,000 Total Liabilities (e = c+d) $1,973,000 Equipment (f) $2,964,000 Common Stock (f) $495,000 Buildings (g) $1,610,000 Retained Earnings (g) $2,445,000 Fixed Assets (h= f + g) $4,574,000 Stockholders' Equity (h = f+g) $2,940,000 Total Assets (e+h) $4,913,000 Total Liabilities and Equity (e+h) $4,913,000 c. Con rad paid dividends totaling $505,000 and invested the balance of the net income in building a new hangar. Net Income $1,366,000 Retained Earning Calculation Less: Amount paid as dividend $505,000 Opening $1,584,000 Balance $861,000 Add: Net Income $1,366,000 Hangar Made (a) $861,000 $2,950,000 Opening Building (b) $1,610,000 Less: Paid as Dividend $505,000 Balance in Debt (a+b) $2,471,000 Closing $2,445,000 Assets Amount Liabililities and Stockholders' Equity Amount Cash (a) $125,000 Accounts Payable (a) $70,000 Marketable Securities (b) $32,000 Short-term Notes (b) $60,000 Accounts Receivable (c ) $49,000 Current Liabilities (c = a+b) $130,000 Inventories (d) $133,000 Long-term debt (d) $2,704,000 Current Assets (e = a+b+c+d) $339,000 Total Liabilities (e = c+d) $2,834,000 Equipment (f) $2,964,000 Common Stock (f) $495,000 Buildings (g) $2,471,000 Retained Earnings (g) $2,445,000 Fixed Assets (h= f + g) $5,435,000 Stockholders' Equity (h = f+g) $2,940,000 Total Assets (e+h) $5,774,000 Total Liabilities and Equity (e+h) $5,774,000 Conrad paid out all $1,366,000 as dividends to it's stockholders. Balance Sheet remains same as entire amount paid as dividend Assets Amount Liabililities and Stockholders' Equity Amount Cash $125,000 Accounts Payable $70,000 Marketable Securities $32,000 Short-term Notes $60,000 Accounts Receivable $49,000 Current Liabilities $130,000 Inventories $133,000 Long-term debt $2,704,000 Current Assets $339,000 Total Liabilities $2,834,000 Equipment $2,964,000 Common Stock $495,000 Buildings $1,610,000 Retained Earnings $1,584,000 Fixed Assets $4,574,000 Stockholders' Equity $2,079,000 Total Assets $4,913,000 Total Liabilities and Equity $4,913,000
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