Answer:
Lexington Company
The amount of total assets on Lexington's balance sheet at the end of Year 1 was:
$5,860
Explanation:
a) Data and Calculations:
Cash from issue of common stock = $3,200
Cash from bank loan = 2,300
Cash from revenue = 3,200
Cash for expenses = (2,420)
Cash for dividends paid = (420)
Total assets = $5,860
b) We can verify the total assets above by computing the liabilities and equity, which should be equal to the total assets according to the accounting equation. The liabilities = $2,300 (bank loan). The equity = common stock plus retained earnings ($3,200 + $3,200 - $2,420 - $420), which = $3,560. The total of liabilities and equity = $5,860 ($2,300 + $3,560). Therefore, assets = liabilities + equity ($5,860 = ($2,300 + $3,560).
