A company reported the following asset and liability balances at the end of 2018 and 2019: During 2019,cash dividends of $50,000 were declared and paid,and common stock was issued for $100,000.What was the amount of net income for 2019?
A)$400,000.
B)$480,000.
C)$350,000.
D)$300,000.

Question

A company reported the following asset and liability balances at the end of 2018 and 2019:  During 2019,cash dividends of $50,000 were declared and paid,and common stock was issued for $100,000.What was the amount of net income for 2019?
A)$400,000. 
B)$480,000. 
C)$350,000. 
D)$300,000.

Quizplus · Accepted Answer

To determine the net income for 2019, we need to use the formula: 
Net Income = Revenues - Expenses - Taxes 
However, we are not given any information about revenues, expenses, or taxes. Instead, we can use the changes in the asset and liability balances to infer the net income.

We know that the company declared and paid $50,000 in cash dividends, which is a reduction in the retained earnings balance. Therefore, we can calculate the change in retained earnings as: 
Retained Earnings (2019) - Retained Earnings (2018) = -$50,000

We also know that the company issued $100,000 of common stock, which increases the stockholders' equity balance. Therefore, we can calculate the change in stockholders' equity as: 
Stockholders' Equity (2019) - Stockholders' Equity (2018) = $100,000

To relate these changes to net income, we can use the following formula: 
Net Income = Change in Retained Earnings + Change in Stockholders' Equity 
Net Income = (-$50,000) + $100,000 
Net Income = $50,000

Therefore, the correct choice is C, $350,000.

A Company Reported the Following Asset and Liability Balances at the End