Answer
(a) The above-given statement can be reasonable.
(b) The case here presented isn’t uncommon.
Work Step by Step
(a)
• In the above case we get to know from the retained earnings statement that the corporation has shown a dividend charge of $68000.00$ whereas the net income of the corporation was $75000.00$
• So when we think about these, we get to know these numbers maybe not be that much importance because there may be a large amount of retained earning carried from the previous year which can indicate high amounts of dividends.
• There may be another possibility that the corporation may pay one-third of the dividend bonus that may be paid out, which results in inflating of the numbers.
• So without any further information, it is difficult to measure or to calculate, however, the explanation is correct.
(b)
• In the second state after seeing we get to know from the cash flow statement of the company that the funds that are being provided by the operating activities were $10,000.00 $ whereas the funds that were used in investing activities were $110,000.00 $ and financing activities is $130,000.00. $
• So the from the above case we get to know the situation as not at all good because it seems that the corporation has been raised the funds through debt or other means of buy types of equipment.
• Generally this is commonly seen during the renovation or any up-gradation or overhaul.
• As a result, the above case is not all uncommon.
