Question

The following account balances were drawn from the financial statements of Grayson Company:Cash: $8,800Accounts Receivable: $3,000Land: $16,000Accounts Payable: $2,500Common Stock: ?Retained Earnings, Jan. 1: $5,400Revenue: $19,000Expenses: $14,500Based on the above information, what is the balance of Common Stock for Grayson Company?

Answer 1

Answer:

Common Stocks 15,400

Explanation:

cash                             8,800          Account Payable  2,500

account receivable    3,000         Common Stock            x    (B)

Total Current Assets 11,800           Reained Earnings  9,900 (A)

Land                          16,000      

Total Assets              27,800         Liability + SE        27,800

(A) First we calculate the RE:

beginning RE + net income

net income = revenue - expense

19,000 - 14,500 = 4,500

beginning RE + net income

5,400 + 4,500 = 9,900

(B) We solve for Equity using the accounting equation

 Liab + Equity = Assets

 2,500 + (Comon Stock + Retained Earnings) = 27,800

 Common stock + 9,900 = 27,800 - 2,500

 Common stock = 27,800 - 2,500 - 9,900 = 15,400