Exercise 1-10A (Algo) Interpreting information in an accounting equation LO 1-5 The financial condition of two companies is expressed in the following accounting equation: Assets = Liabilities + Common Stock + Retained Earnings Allen $ 12,000 = $ 8,760 + $ 2,760 + $ 480 White $ 18,150 = $ 4,200 + $ 9,750 + $ 4,200 Required a. Based on this information alone, can White pay a $4,600 dividend? b-1. Reconstruct the accounting equation for each company using percentages instead of dollar values. b-2. Which company is more financially stable?
Exercise 1-10A (Algo) Interpreting information in an accounting equation LO 1-5
The financial condition of two companies is expressed in the following accounting equation:
| Assets | = | Liabilities | + | Common Stock | + | ||
|---|---|---|---|---|---|---|---|
| Allen | $ 12,000 | = | $ 8,760 | + | $ 2,760 | + | $ 480 |
| White | $ 18,150 | = | $ 4,200 | + | $ 9,750 | + | $ 4,200 |
Required
a. Based on this information alone, can White pay a $4,600 dividend?
b-1. Reconstruct the accounting equation for each company using percentages instead of dollar values.
b-2. Which company is more financially stable?
c. Assume Allen incurs a $6,100 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 $6,100 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?
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