Question

In: Finance

How do liabilities and stockholders’ equity differ? How are they similar? B. Explain how retained earnings...

How do liabilities and stockholders’ equity differ? How are they similar? B. Explain how retained earnings and dividends are related? How do cash dividends affect the financial statements? C. How a company can reduce its break-even point?

Expert Solution

Part-A)

How do liabilities and stockholders’ equity differ?

Ans:The important difference between stockholder's equity and liabilities is that stockholder equity is money owed to shareholders within the company while liabilities are owed to external parties. It is also important to note that in bankruptcy law, liabilities take precedence over stockholders' equity, meaning that a firm must pay its debts before its shareholders in the event of a bankruptcy.

.

How do liabilities and stockholders’ equity similar?

Stockholder's equity and liabilities are both monies that a firm owes.Stockholder's equity is similar to a liability in that it is an amount of money that is earmarked to be paid out (to shareholders and creditors, respectively). On a balance sheet, stockholder's equity and liabilities are placed in the right hand column while assets are placed in the left hand column. The total of a firm's liabilities and stockholder equity must always be equal to its assets.

.

Part-B)

Explain how retained earnings and dividends are related?

Generally dividend is paid out of Retained Earnings of a Company.Retained earnings, an equity account found on the company's balance sheet, is reduced at the time the dividends are declared.

.

How do cash dividends affect the financial statements?

Cash dividends are the payments a corporation makes to its shareholders as a return of the company's profits.Cash Dividend reduce the retained earnings balance on the liability side and the cash balance on the asset side.

.

Part-C)

How a company can reduce its break-even point?

Company can reduce is break even point by:

1) reducing the amount of fixed costs,

2) reducing the variable costs per unit—thereby increasing the unit's contribution margin,

3) improving the sales mix by selling a greater proportion of the products having larger contribution margins, and

4) increasing selling prices so long as the number of units sold will not decline significantly.

jeff jeffy answered 2 months ago

In the Stockholders' Equity section of a Balance Sheet: A. Retained Earnings goes first. B. common...

In the Stockholders' Equity section of a Balance Sheet: A. Retained Earnings goes first. B. common stock goes first. C. preferred stock goes first. D. assets are listed first.

16. When there are significant changes in stockholders equity, generally, a retained earnings statement is not...

16. When there are significant changes in stockholders equity, generally, a retained earnings statement is not sufficient, requiring a statement of stockholders’ equity to be prepared. a. True b. False 17. The equity reporting for a Limited Liability Corporation is similar to that of a partnership but the changes in capital ate shown on a statement of members’ equity. a. True b. False 18. When a partner invests noncash assets in a partnership, the assets are recorded at the partner’s...

1. The accounting equation is defined as: a. Common Stock + Retained Earnings = Stockholders’ Equity....

1. The accounting equation is defined as: a. Common Stock + Retained Earnings = Stockholders’ Equity. b. Revenues - Expenses = Net Income. c. Revenues - Expenses - Dividends = Retained Earnings. d. Assets = Liabilities + Stockholders’ Equity. 2. On January 1, Art Inc. started the year with a $492,000 balance in Retained Earnings and a $605,000 balance in Common Stock. During the year, the company earned net income of $92,000, paid a dividend of $15,200, and issued more...

15. (a) Define the terms assets, liabilities, and stockholders’ equity. (b) What items affect stockholders’ equity?...

15. (a) Define the terms assets, liabilities, and stockholders’ equity. (b) What items affect stockholders’ equity? 16. Which of these items are liabilities of White Glove Cleaning Service? (a) Cash. (f) Equipment. (b) Accounts payable. (g) Salaries and wages (c) Dividends. payable. (d) Accounts receivable. (h) Service revenue. (e) Supplies. (i) Rent expense.

The stockholders' equity section of the balance sheet typically includes the line items of retained earnings,...

The stockholders' equity section of the balance sheet typically includes the line items of retained earnings, common stock, treasury stock, and other comprehensive income. Select two of these line items (common stock and Treasury stock) and explain what their balances might indicate about how Ford Motor Company is utilizing the investment by its stockholders. In your response, address whether you would want to purchase stock in the company based on your analysis. Please use a scholarly article for reference.

Retained Earnings: Transactions and Statement The stockholders’ equity of Elson Corporation at January 1 is shown...

Retained Earnings: Transactions and Statement The stockholders’ equity of Elson Corporation at January 1 is shown below: 5 Percent preferred stock, $100 par value, 10,000 shares authorized; 6,000 shares issued and outstanding $600,000 Common stock, $5 par value, 200,000 shares authorized; 70,000 shares issued and outstanding $350,000 Paid-in capital in excess of par value-Preferred stock 40,000 Paid-in capital in excess of par value-Common stock 300,000 Retained earnings 656,000 Total Stockholders' Equity $1,946,000 The following transactions, among others, occurred during the...

Coronado Inc. has retained earnings of $780000 and total stockholders’ equity of $2100000. It has 302000...

Coronado Inc. has retained earnings of $780000 and total stockholders’ equity of $2100000. It has 302000 shares of $5 par value common stock outstanding, which is currently selling for $30 per share. If Coronado declares a 10% stock dividend on its common stock: net income will decrease by $151000. retained earnings will decrease by $151000 and total stockholders’ equity will increase by $151000. retained earnings will decrease by $906000 and total paid-in capital will increase by $906000. retained earnings will...

Retained Earnings: Transactions and Statement The stockholders’ equity of Ranger Corporation at January 1 appears below:...

Retained Earnings: Transactions and Statement The stockholders’ equity of Ranger Corporation at January 1 appears below: Common stock, $10 par value, 200,000 shares authorized; 80,000 shares issued and outstanding $800,000 Paid-in capital in excess of par value 480,000 Retained earnings 305,000 During the year, the following transactions occurred: May 12 Declared a 15 percent stock dividend; market value of the common stock was $22 per share. June 6 Issued the stock dividend declared on May 12. Dec. 5 Declared a...

Retained Earnings: Transactions and Statement The stockholders’ equity of Striker Corporation at January 1 appears below:...

Retained Earnings: Transactions and Statement The stockholders’ equity of Striker Corporation at January 1 appears below: Common stock, $10 par value, 300,000 shares authorized; 105,000 shares issued and outstanding $800,000 Paid-in capital in excess of par value 480,000 Retained earnings 305,000 During the year, the following transactions occurred: May 12 Declared a 9 percent stock dividend; market value of the common stock was $21 per share. June 6 Issued the stock dividend declared on May 12. Dec. 5 Declared a...

Income Statement Statement of Stockholders’ Equity Revenues #33 Common stock Retained earnings Expenses: Beginning $300,000 $275,000...

Income Statement Statement of Stockholders’ Equity Revenues #33 Common stock Retained earnings Expenses: Beginning $300,000 $275,000 Salaries $325,000 Issuance #35 Administrative 340,000 Net income 125,000 Utilities 10,000 Dividends #36 Total expenses 675,000 Ending $500,000 $350,000 Net income #34 Balance Sheet Assets Liabilities Cash $45,000 Accounts payable $20,000 A/R 55,000 Notes payable 250,000 Supplies #37 Total liabilities $270,000 Prepaid rent 3,000 Stockholders’ Equity Equipment 450,000 Common stock ? Building 566,800 Retained earnings ? Total stockholders’ equity #39 Total assets #38...