Answer:
See the explanation below:
Explanation:
a. Create an accounting equation and record the effects of each accounting event under the appropriate general ledger account headings.
Assets = Liabilities + Stockholders' Equity ......... (1)
Cash is a component of Asset, therefore the transaction will affect assets or cash as follows:
Asset: + $28,600, - $13,200, - $1,500
Cash balance = Asset = $28,600 - $13,200 - $1,500 = $13,900
Retained Earnings is a component of Stockholders' Equity
, therefore the transaction will affect Stockholders' Equity or Stockholders' Equity as follows:
Retained Earnings; + $28,600, - $13,200, - $1,500
Retained Earnings = $28,600 - $13,200 - $1,500 = $13,900 = Stockholders' Equity
Liabilities = 0. This is because the three transactions does not affect liabilities
Substituting the values into the equation (1), we have:
$13,900 = 0 + $13,900
b. Prepare an income statement, statement of changes in stockholders' equity, and a balance sheet.
1. Income statement
Details Amount ($)
Revenues 28,600
Expenses <u> (13,200) </u>
Profit 15,400
Dividend <u> (1,500) </u>
Retained earning <u> 13,900 </u>
2. Statement of changes in stockholders' equity
Details Amount ($)
Common stock 0
Retained b/f 0
Retained earning for the year <u> 13,900 </u>
Stockholders' equity <u> 13,900 </u>
3. Balance sheet.
Details Amount ($)
Assets
Cash 13,900
Other assets <u> 0 </u>
<u> 13,900 </u>
Stockholders' equity
Common stock 0
Retained earning <u> 13,900 </u>
<u> 13,900 </u>
c. Explain why the income statement uses different terminology to date the income statement than is used to date the balance sheet.
The reason is the income statement shows the performance of a company during a particular period, while the balance sheet shows the assets and liabilities of the company at a specific point in time.
