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

Common Stocks 15,400

Step-by-step 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