Final answer:
To calculate the cash Prat Corp. received for services, we account for all cash inflows and outflows and the effect on Retained Earnings.
Step-by-step explanation:
The question seeks to determine the amount of cash Prat Corp. received for performing services. To find this, we start with the increase in Retained Earnings, which is $14,550. This increase is the result of the year's net income, as no other entries typically affect Retained Earnings directly other than profits/losses and dividends paid out. Given that Prat Corp. paid dividends of $2,700, the net income before dividends is, therefore, $14,550 + $2,700 = $17,250.
We have to consider the cash Prat spent and received during the year. The total cash outflow includes $29,500 for expenses, $2,700 in dividends, and $10,000 to reduce liability, which sums up to $42,200. The inflows of cash are from the issue of common stock totaling $8,500, and the unknown amount received for services. Given that Prat started with $37,000, we can establish the following equation:
Starting Cash + Cash from Services + Cash from Stock Issued - Cash Expenses - Dividends - Cash to Reduce Liability = Ending Cash
$37,000 + Cash from Services + $8,500 - $29,500 - $2,700 - $10,000 = Ending Cash
Since the net income was $17,250 (as mentioned above) and no new assets were purchased or sold except for cash transactions, we can imply that the year-end cash should match the starting cash plus net income. This gives us:
$37,000 + $17,250 = $54,250 as the Ending Cash balance. Now, inputting the known values into the equation:
$37,000 + Cash from Services + $8,500 - $29,500 - $2,700 - $10,000 = $54,250
By solving the equation, Cash from Services equals $50,950.