The December 31, 2018, balance sheet for Deen Company showed total stockholders’

Question

The December 31, 2018, balance sheet for Deen Company showed total stockholders’ equity of $69,500. Total stockholders’ equity increased by $32,000 between December 31, 2018, and December 31, 2019. During 2019 Deen Company acquired $12,000 cash from the issue of common stock. The Company paid a $3,500 cash dividend to the stockholders during 2019.

Required

Determine the amount of net income or loss Deen reported on its 2019 income statement. (Hint: Remember that stock issues, net income, and dividends all change total stockholders’ equity.)

Explanation / Answer

Final equity = initial equity + equity raise + net income - dividends

final equity - inital equity = 32,000 = 12,000 + net income - 3,500

net income = 23,500

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