Determine the amount of retained earnings

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Exercise - Missing information and recording events

As of December 31, Year 1, Moss Company had total cash of $195,000, notes payable of $90,500 and common stock of $84,500. During Year 2, Moss earned $42,000 of cash revenue,-paid $24,000 for cub expenses, and paid a $3,000 cash dividend to the stockholders.

Required

a. Determine the amount of retained earnings as of December 31, Year I.

b. Create an accounting equation and record the beginning account balances under the appropriate elements.

c. Record the revenue, expense, and dividend events under the appropriate elements of the account¬ing equation created in Requirement b.

d. Prove the equality of the accounting equation as of December 31, Year 2.

e. Identify the beginning and ending balances in the Cash and Common Stock accounts. Explain why the beginning and ending balances in the Cash account are different but the beginning and ending balances in the Common Stock account remain the same.

Reference no: EM132613160

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