Changes in account balances of Multi-Plus Inc.during 2012 were: $$\begin{array} { l r }
&\text {Increase}\
\text {Assets}&\$420,000\
\text {Liabilities}&125,000\
\text {Capital Stock}&100,000\
\text {Additional Paid-In Capital}&140,000\
\text {Retained Earnings}&?\
\end{array}$$ Assuming that there were no charges to retained earnings other than dividends of $62,000, the net income for 2010 was:
A)($7,000)
B)$55,000
C)$117,000
D)$257,000
E)none of the answers are correct

Question

Changes in account balances of Multi-Plus Inc.during 2012 were: $$\begin{array} { l r } 
&\text {Increase}\
\text {Assets}&\$420,000\
\text {Liabilities}&125,000\
\text {Capital Stock}&100,000\
\text {Additional Paid-In Capital}&140,000\
\text {Retained Earnings}&?\
\end{array}$$ Assuming that there were no charges to retained earnings other than dividends of $62,000, the net income for 2010 was:
A)($7,000)
B)$55,000
C)$117,000
D)$257,000
E)none of the answers are correct

Quizplus · Accepted Answer

The increase in assets ($420,000) equals the increase in liabilities ($125,000) plus the increase in equity (capital stock $100,000 + additional paid-in capital $140,000 + retained earnings). Solving for the increase in retained earnings: $420,000 = $125,000 + $100,000 + $140,000 + retained earnings, which gives retained earnings = $55,000. Adding back the dividends of $62,000 gives a net income of $117,000.

Changes in Account Balances of Multi-Plus Inc Assuming That There Were No Charges to Retained Earnings Other