Question

Maben Company was started on January 1, 2018, and experienced the following events during its first year of operation:

Acquired $35,000 cash from the issue of common stock.

Borrowed $47,000 cash from National Bank.

Earned cash revenues of $63,000 for performing services.

Paid cash expenses of $52,500.

Paid a $2,500 cash dividend to the stockholders.

Acquired an additional $35,000 cash from the issue of common stock.

Paid $12,000 cash to reduce the principal balance of the bank note.

Paid $46,000 cash to purchase land.

Determined that the market value of the land is $64,000.

Determine the percentage of assets that were provided by investors, creditors, and earnings. (Round your answers to 2 decimal places.)
Investors ??%
Creditors ??%
Earnings ??%

Answer 1

61.95%

30.97%

7.08%

Explanation:

For computing the percentage of assets provided by investors, creditors, and earnings first we need to find out the ending cash balance which is shown below:

Ending Cash Balance (Amounts in $)

Cash from issue of common stock 35,000

Add: Borrowing from National bank 47,000

Add: Earned cash revenues 63,000

Less: Paid cash expenses (52,500)

Less: Paid cash dividend (2,500)

Add: Acquired an additional issue of shares 35,000

Less: Repayment of bank note (12,000)

Less: Purchase of land (46,000)

Ending cash balance 67,000

Now the ending balance of total assets, common stock, bank note payable, retained earning are as follows

Total assets = Land + Cash

= $46,000 + $67,000

= $113,000

The Ending balance of Common Stock is

= Issuance of the common stock + Additional issuance of the stock

= $35,000+$35,000

= $70,000

The Ending Balance of Bank Note

= Borrowings - repayment

= $47,000 - $12,000

= $35,000

The Ending Retained Earnings balance is

= Revenues earned - Expenses incurred - Dividends paid

= $63,000 - $52,500 - $2,500

= $8,000

So,

`Investors\ Percentage\ of\ Assets = (Common\ Stock)/(Assets)`

`=(\$70,000)/(\$113,000)`

`= 61.95\%`

`Creditors\ Percentage\ of\ Assets = (Borrowings\ from\ Bank)/(Assets)`

`=(\$35,000)/(\$113,000)`

`= 30.97\%`

`Earnings\ Percentage\ of\ Assets = (Retained\ Earnings)/(Assets)`

`= (\$8,000)/(\$113,000)`

`= 7.08\%`