Thai Company was formed on January 1, 20X1. The company's accountant prepared the following income statement, statement of retained earnings, and balance sheet at the conclusion of the first full year of operations. Mr. Thai desires for the company to declare and pay a dividend equivalent to the company's net income for the year. THAI COMPANY Income Statement For the Year Ending December 31, 20X1 Revenues Services to customers 105,000 Expenses Wages 2$ 45,000 Rent 18,000 3,000 Net income 42,000 THAI company Balance Sheet December 31, 20X1 Assets Cash 6,000 Accounts receivable 22,500 Equipment 75,000 Total assets 103,500 Liabilities Rent payable 1,500 Notes payable 45,000 Total liabilities 46,500 Stockholders' equity Capital stock 15,000 Retained earnings 42,000 Total stockholders' equity 57,000 Total liabilities and equity 103,500 a) Is the company currently able to declare and pay the dividend? Why or why not? b) Explain why net income can differ from cash provided by operations. c) In addition to operating activities, what other "categories" of business activity can generate or expend cash? Provide examples for each category.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Topic Video
Question
Thai Company was formed on January 1, 20X1. The company's accountant prepared the following income
statement, statement of retained earnings, and balance sheet at the conclusion of the first full
year
of
operations. Mr. Thai desires for the company to declare and pay a dividend equivalent to the company's
net income for the year.
THAI COMPANY
Income Statement
For the Year Ending December 31, 20X1
Revenues
Services to customers
105,000
Expenses
Wages
24
45,000
Rent
18,000
3,000
Net income
42,000
THAI company
Balance Sheet
December 31, 20X1
Assets
Cash
6,000
Accounts receivable
22,500
Equipment
75,000
Total assets
103,500
Liabilities
Rent payable
1,500
Notes payable
45,000
Total liabilities
46,500
Stockholders' equity
Capital stock
15,000
Retained earnings
42,000
Total stockholders' equity
57,000
Total liabilities and equity
103,500
a) Is the company currently able to declare and pay the dividend? Why or why not?
b) Explain why net income can differ from cash provided by operations.
c) In addition to operating activities, what other "categories" of business activity can generate
or expend cash? Provide examples for each category.
Transcribed Image Text:Thai Company was formed on January 1, 20X1. The company's accountant prepared the following income statement, statement of retained earnings, and balance sheet at the conclusion of the first full year of operations. Mr. Thai desires for the company to declare and pay a dividend equivalent to the company's net income for the year. THAI COMPANY Income Statement For the Year Ending December 31, 20X1 Revenues Services to customers 105,000 Expenses Wages 24 45,000 Rent 18,000 3,000 Net income 42,000 THAI company Balance Sheet December 31, 20X1 Assets Cash 6,000 Accounts receivable 22,500 Equipment 75,000 Total assets 103,500 Liabilities Rent payable 1,500 Notes payable 45,000 Total liabilities 46,500 Stockholders' equity Capital stock 15,000 Retained earnings 42,000 Total stockholders' equity 57,000 Total liabilities and equity 103,500 a) Is the company currently able to declare and pay the dividend? Why or why not? b) Explain why net income can differ from cash provided by operations. c) In addition to operating activities, what other "categories" of business activity can generate or expend cash? Provide examples for each category.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 3 images

Blurred answer
Knowledge Booster
Financial Statements
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education