Final answer:
The Bentley Company has the ability to pay a cash dividend of $400, which matches its retained earnings. They also have sufficient assets to pay off their $1,000 note payable when considering the value of their land.
Step-by-step explanation:
The financial position of the Bentley Company is given with the following elements: Cash - $600, Land - $2,200, Notes Payable - $1,000, Common Stock - $1,400, and Retained Earnings - $400. When analyzing the ability of the company to pay dividends or settle liabilities, we look at the liquidity and retained earnings available.
Since Bentley Company has $600 in cash and retained earnings of $400, it is able to pay a cash dividend up to $400 safely, which is the amount in retained earnings, as the retained earnings represent the cumulative net income that has been retained by the company and not paid out as dividends.
Regarding the notes payable of $1,000, the company has enough liquid assets (cash) to pay off this debt. The cash position of $600 alone isn’t sufficient to pay the entire note, however, considering the liquidity from land if it can be easily sold or mortgaged, may contribute to paying off the debt.