Problem
Conrad Air, Inc., reported net income of $1,375,000 for the year ended December 31, 2022. Show how Conrad's balance sheet would change from 2021 to 2022 depending on how Conrad "spent" those earnings as described in the scenarios that appear below.
1. Conrad paid no dividends during the year and invested the funds in marketable securities.
2. Conrad paid dividends totaling $500,000 and used the balance of the net income to retire (pay off) long-term debt.
3. Conrad paid dividends totaling $500,000 and invested the balance of the net income in building a new hangar.