Problem 1.6 The simple mechanics of equity We are looking at balance sheet information of McGee Corporation just before and after the year 20X2, and we want to understand what happened to the company's equity during 20x2. 31.12.20x1 31.12.20x2 + Year 20X2 This is McGee Corporation's summary balance sheet: Dec 31, 20X1 Dec 31, 20X2 Total assets $1.500.000 $2.300.000 Total liabilities $700.000 $1.400.000 a) Calculate the missing balance sheet information. b) How did McGee's equity change during the year 20X2? c) What was McGee's net income in 20X2, assuming that 1. no new capital was paid in, and 2. no dividends were paid out? Problem 1.7 How does equity change? Continue with the figures from the previous problem, where you computed the net income for 20X2 assuming there was no new capital and no dividend. Now we will take this one step further with different assumptions about capital and dividends. Tip: Remember there are two components of equity (what are they?) Now apply the simple rules of the Accounting Equation A=L+ E and find the net income in these four alternative situations. L A E E 1. 2. a) In 20X2, McGee... paid no dividends, but raised $250,000 new capital by issuing new shares. b) ... paid $100,000 in dividends and raised $250.000 by issuing additional shares of stock. c) .. paid $100,000 in dividends, and no additional capital was raised via share issuances. d) paid no dividends, and no additional capital was raised via share issuances