The financial condition of two companies is expressed in the following accounting equation: Assets=Liabilities+Common Stock+Retained EarningsAllen$ 12,000=$ 8,760+$ 2,760+$ 480White$ 18,150=$ 4,200+$ 9,750+$ 4,200Requireda. Based on this information alone, can White pay a $4,600 dividend?b-1. Reconstruct the accounting equation for each company using percentages instead of dollar values.b-2. Which company is more financially stable?

Dividends are paid to investors from the retained earnings only of there is available balance for…

Answered: The financial condition of two…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 17E

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The financial condition of two companies is expressed in the following accounting equation:

	Assets	=	Liabilities	+	Common Stock	+	Retained Earnings
Allen	$ 12,000	=	$ 8,760	+	$ 2,760	+	$ 480
White	$ 18,150	=	$ 4,200	+	$ 9,750	+	$ 4,200

Required
a. Based on this information alone, can White pay a $4,600 dividend?
b-1. Reconstruct the accounting equation for each company using percentages instead of dollar values.
b-2. Which company is more financially stable?

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