Question Conrad Air Inc. reported net income of $1,365,000 for the year ended December 31, 2020. Show how Conrad’s balance sheet would change from 2019 to 2020 depending on how Conrad “spent” those earnings as described in the scenarios that appear below Conrad Air Inc. Balance Sheet as of December 31, 2019 Assets Cash $ 120,000 Marketable securities 35,000 Accounts receivable 45,000 Inventories $ 130,000 Current assets 330,000 Equipment 2,970,000 Buildings 1,600,000 Fixed assets 4,570,000 Total assets $4,900,000 Liabilities and Stockholders’ Equity Accounts payable $ 70,000 Short-term notes 55,000 Current liabilities 125,000 Long-term debt 2,700,000 Total liabilities 2,825,000 Common stock 500,000 Retained earnings 1,575,000 Stockholders’ equity 2,075,000 Total liabilities and equity $4,900,000 a. Conrad paid no dividends during the year and invested the funds in marketable securities. b. Conrad paid dividends totaling $500,000 and used the balance of the net income to retire (pay off) long-term debt. c. Conrad paid dividends totaling $500,000 and invested the balance of the net income in building a new hangar. d. Conrad paid out all $1,365,000 as dividends to its stockholder
Question
Conrad Air Inc. reported net income of $1,365,000 for the year ended December 31, 2020. Show how Conrad’s
Conrad Air Inc. Balance Sheet as of December 31, 2019
Assets Cash $ 120,000
Marketable securities 35,000
Inventories $ 130,000
Current assets 330,000
Equipment 2,970,000
Buildings 1,600,000
Fixed assets 4,570,000
Total assets $4,900,000
Liabilities and
Accounts payable $ 70,000
Short-term notes 55,000
Current liabilities 125,000
Long-term debt 2,700,000
Total liabilities 2,825,000
Common stock 500,000
Stockholders’ equity 2,075,000
Total liabilities and equity $4,900,000
a. Conrad paid no dividends during the year and invested the funds in marketable securities.
b. Conrad paid dividends totaling $500,000 and used the balance of the net income to retire (pay off) long-term debt.
c. Conrad paid dividends totaling $500,000 and invested the balance of the net income in building a new hangar.
d. Conrad paid out all $1,365,000 as dividends to its stockholder
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