TotalAssets Total Liabilities Beginning of the year $100,000 $50,000 End of they

Question

                                    TotalAssets           Total Liabilities
Beginning of the year     $100,000              $50,000 End of theyear              $500,000              $350,000 Refer to Exhibit 2-1 (above). What is net income assuming $50,000 of stock was issued, and$25,000 of dividends were paid? a. $75,000 b. $50,000 c. $70,000 d. $10,000                                     TotalAssets           Total Liabilities
Beginning of the year     $100,000              $50,000 End of theyear              $500,000              $350,000 Refer to Exhibit 2-1 (above). What is net income assuming $50,000 of stock was issued, and$25,000 of dividends were paid? a. $75,000 b. $50,000 c. $70,000 d. $10,000

Explanation / Answer

Increase in Assets 400,000.00 Less : Increase in Liabilities 300,000.00 Increase in Capital Stock 50,000.00 (350,000.00) Increase in Retained Earnings 50,000.00 Add : Cash Dividends paid 25,000.00 Net Income for theyear 75,000.00 Use the Accounting Equation, Assets = Liabilities + Common Stock               + Retained Earnings

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