On January 1, Year 3, the following information was drawn from the accounting records of Carter Company: cash of $800; land of $3,500; notes payable of $600; and common stock of $1,000.

Required

a. Determine the amount of retained earnings as of January 1, Year 3.

b. After looking at the amount of retained earnings, the chief executive officer (CEO) wants to pay a $1,000 cash dividend to the stockholders. Can the company pay this dividend? Why or why not?

c. As of January 1, Year 3, what percentage of the assets were acquired from creditors? Round to three decimal places.

d. As of January 1, Year 3, what percentage of the assets were acquired from investors? Round to three decimal places.

e. As of January 1, Year 3, what percentage of the assets were acquired from retained earnings? Round to three decimal places.

f. Create an accounting equation using percentages instead of dollar amounts on the right side of the equation.

g. During Year 3, Carter Company earned cash revenue of $1,800, paid cash expenses of $1,200, and paid a cash dividend of $500. Prepare an income statement, statement of changes in stockholders’ equity, a balance sheet, and a statement of cash flows dated December 31, Year 3. It is helpful to record these events under an accounting equation before preparing the statements.

h. Comment on the terminology used to date each statement.

i. An appraiser determines that as of December 31, Year 3, the market value of the land is $4,200. How will this fact change the financial statements?

j. What is the balance in the Revenue account on January 1, Year 4?