Can somebody please help?!

[jonnyfresh]

I have these problems for accounting homework, and my teacher is horrible. Can somebody please please help me with these two problems so I can go on about my merry existence?

The December 31, 2013, balance sheet for Thomas Company showed total stockholders’ equity of $66,000. Total stockholders’ equity increased by $25,500 between December 31, 2013, and December 31, 2014. During 2014 Thomas Company acquired $11,500 cash from the issue of common stock. Thomas Company paid a $6,500 cash dividend to the stockholders during 2014.

Required

Determine the amount of net income or loss Thomas reported on its 2014 income statement. (Hint: Remember that stock issues, net income, and dividends all change total stockholders’ equity.)
----------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2014, Blue Haven Company had total assets of $170,000, total liabilities of $51,000, and common stock of $85,000. The company’s 2014 income statement contained revenue of $30,000 and expenses of $18,000. The 2014 statement of changes in stockholder’s equity stated that $2,700 of dividends were paid to investors.

Required
a.

Determine the before-closing balance in the Retained Earnings account on December 31, 2014.



b.

Determine the after-closing balance in the Retained Earnings account on December 31, 2014.

 

[ICAEW]

Question 1

31-Dec-14
Closing Equity 91,500 (66,000+25,500)

Less: -11500 stock issue
Add back: 6,500 dividends

Less: -66,000 opening equity

Net income 20,500 balancing figure



Question 2

31-Dec-14

Total Assets 170,000

Total Liabilities -51,000

Total Equity -85,000

Retained Earnings
must be (balancing figure) 34,000 31-Dec-14

Deduct: Net profit -12,000

Add back: Dividends paid 2,700

Opening Retained Earnings 24,700 balancing figure

add profit 12,000 Reconciliation to check whether correct or not.

less dividends -2,700

closing balance at 31 Dec 2014 34,000

 

[jonnyfresh]

Thanks a bunch!

 

[Samir]

So did you understand why these were the answers and learn what your teacher did not teach?

Or are you just another one of those people out there that 'passed' and don't have a clue of what's going on?

 

[Grumpy]

Hi, so I have a quick question on a related question to question 1.
Why when it says that he "acquired" $11,500 in stocks is it then subtracted from the total? I can't seem to wrap my head around that. If it says he acquired it then shouldnt he be gaining something, i.e. the cash?

My question is ideally the same as the one above but using different numbers.
When I read it and tried to solve it before I saw this thread, I was initially thinking that you added the two equities (66,000 + 25,500) then add the stock issues and subtract the dividends.
It says he acquired the stock issues (meaning gained) and paid the dividend (meaning loss).
I also don't understand why you subtracted the initial $66,000 equity from the beginning at the end.

Any explanations would be much appreciated!

 

[TStant]

Hello! Here are some notes to help you understand what is going on here.

Beginning equity + Increases in equity = Ending equity

In our case, our increase in equity would be:
Increase in equity = Issuances of stock + Net income - Dividends

So let's plug in what we know:
25,500 = 11,500 + ? - 6500

This is where you are seeing that negative. You are correct that issuing stock increases equity. The other poster was using algebra to work backwards:

25500 = 11500 + x - 6500 Solve for x
25500 - 11500 + 6500 = x
x = 20500