Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 100

Review exercise—calculate net income At the beginning of the current fiscal year, the balance sheet of Hughey, Inc., showed owners’ equity of $520,000. During the year, liabilities increased by $21,000 to $234,000; paid-in capital increased by $40,000 to $175,000; and assets increased by $260,000. Dividends declared and paid during the year were $55,000.

Required:

Calculate net income or loss for the year. (Hint: Set up the accounting equation for beginning balances, changes during the year, and ending balances; then solve for missing amounts.)

					OE
	A	=	L	+	PIC	+	RE
Beginning $		=		+		+
Changes		=		+		+
Ending		=		+		+

Step 1 of 9

Calculate Net income:

Accounting equation:

Accounting equation refers total assets equals to total liabilities and total stock holders’ equity that is, increase in assets results to decrease in assets or corresponding increase in liabilities or stock holders’ equity to match the same. The relationship can be understood by the following formula.

By extracting the information: