Final answer:
Based on Qualtro Company's financials, it cannot afford to pay a $600 cash dividend or fully settle a $800 note payable with only $400 in cash. However, the company can pay a $300 cash dividend and still maintain sufficient cash to manage liabilities.
Step-by-step explanation:
The student's question asks whether Qualtro Company can undertake certain financial actions based on its accounting equation. Analyzing the equation Assets (Cash [$400] + Land [$2,200]) = Liabilities (Notes Payable [$800]) + Stockholders' Equity (Common Stock [$1,200] + Retained Earnings [$600]), we can determine Qualtro Company's financial capabilities regarding dividends and liabilities.
Qualtro Company has a total of $400 in cash. It owes $800 in notes payable. Although it has retained earnings of $600, it cannot pay a $600 cash dividend without reducing its cash assets below the level needed to pay off its current liabilities. Furthermore, paying off the note payable entirely would also not be possible without additional cash beyond the current $400. Therefore, the correct answer is that Qualtro Company can pay a $300 cash dividend while maintaining enough cash to cover its other liabilities.