Retained earnings question?

Question

I have the following problem:

Company A generates $1500 in revenue. They disburse $200 in dividends. The company also spends $300 on expenses, and invests $400 in land. Create a balance sheet.


Now, from what I understand: Assets = Liabilities + Stockholder's Equity. So, we have:

$1500(revenue) - $300(expenses) - $400(land) = $800 income. Subtracting the dividend of 200 leaves $600 net income.

No liabilities were listed.

Stockholder's equity would be the retained earnings, which are income (800) minus dividends (200). So, that's $600

600(cash asset) + 400(land asset) = 0(liabilities) + 600(stockholder's equity).

What's up with this? 1000 does not equal 600!

Answer 1

Revenue 1500 less expenses 300 gives profit 1200 less dividends 200 give net income 1000 which go to Retained Earnings.

Land is an asset and does not figure in the income statement. You have the assets land, 400 and cash, 600*, totalling 1000. This equals RE of 1000.

*You received cash from revenue of 1500, less expenses 300, less dividends 200, less purchase of land 400, giving a cash balance of 600.

Answer 2

1500 cash _400 land_______1500 revenue
-200 __________________ -200 dividends
-300 __________________ -300 expenses
-400 land
so there is 600 cash and 400 land = 1000
1500 rev. - 500 div. an exp. = 1000
assets = liabilitys + capital