Question

Alexis Company was started in Year 1. At the end of Year 1 the Company's had the following accounting equation.

Cash: 600
land 2200
notes payable 1000
common stock 1400
retained earnings 400

During Year 2, the company experienced the following accounting events.

• Paid of $500 of its note payable.
• Earned $700 of cash revenue.
• Paid $400 of cash expenses.
• Paid a $100 cash dividend.

Based on this information alone, what percent of the company's assets at the end of Year 2 were provided by earnings?

Answer 1

Based on the information given, we cannot calculate the exact percent of assets provided by earnings at the end of Year 2.

Step-by-step explanation:

The accounting equation shows the relationship between a company’s assets, liabilities, and owner’s equity. At the end of Year 1, the company had total assets of $2,800 ($600 cash + $2,200 land). The company also had liabilities of $1,000 (notes payable) and owner’s equity of $1,800 (common stock + retained earnings).

During Year 2, the company paid off $500 of its notes payable, which reduced its liabilities. The company earned $700 in cash revenue and incurred $400 in cash expenses. It also paid a $100 cash dividend to its shareholders.

At the end of Year 2, the company's assets and owners' equity will be different from Year 1 due to the accounting events that occurred. To determine the percent of assets provided by earnings, we need information about the company's net income. Unfortunately, the question does not provide a complete income statement or net income figure. Therefore, we cannot calculate the exact percent of assets provided by earnings based on the information given.