Problem 2-5A Computing net income from equity analysis, preparing a balance shee
ID: 2337811 • Letter: P
Question
Problem 2-5A Computing net income from equity analysis, preparing a balance sheet, and computing the debt ratio LO C2, A1, A2, P3 The following information applies to the questions displayed below] Th e accounting records of Nettle Distribution show the following assets and liabilities as of December 31, 2016 and 2017 Cash 64,300 15,640 Accounts receivable 26,240 19,100 1,960 44,000 44,000 148,000 157,000 0 80,000 0 60,000 3,50033,500 0 40,000 Office supplies Office equipment 3,160 Trucks Building Land Accounts payable Note payable Problem 2-5A Part 2 2. Compute net income for 2017 by comparing total equity amounts for these two years and using the following information: During 2017, the owner invested $35.000 additional cash in the business and withdrew $19,000 cash for personal use.Explanation / Answer
Solution:
Part 2-5A Part 2
2016
2017
Change
Assets
Cash
$64,300
$15,640
Accounts receivable
$26,240
$19,100
Office Supplies
$3,160
$1,960
Office Equipment
$44,000
$44,000
Trucks
$148,000
$157,000
Building
$0
$80,000
Land
$0
$60,000
Total Assets (A)
$285,700
$377,700
Liabilities
Accounts Payable
$3,500
$33,500
Note Payable
$0
$40,000
Total Liabilities (B)
$3,500
$73,500
Net Assets or Total Equity (A - B)
$282,200
$304,200
$22,000
Calculation of Net Income for 2017
Change in Total Equity
$22,000
Less: Owners Capital Invested in 2017
-$35,000
Plus: Withdrawal for Personal Use
$19,000
Net Income for 2017
$6,000
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2016
2017
Change
Assets
Cash
$64,300
$15,640
Accounts receivable
$26,240
$19,100
Office Supplies
$3,160
$1,960
Office Equipment
$44,000
$44,000
Trucks
$148,000
$157,000
Building
$0
$80,000
Land
$0
$60,000
Total Assets (A)
$285,700
$377,700
Liabilities
Accounts Payable
$3,500
$33,500
Note Payable
$0
$40,000
Total Liabilities (B)
$3,500
$73,500
Net Assets or Total Equity (A - B)
$282,200
$304,200
$22,000
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