Abbie Marson is the sole owner and operator of Great Plains Company. As of the end of its accounting period, December 31, Year 1, Great Plains Company has assets of $940,000 and liabilities of $300,000. During Year 2, Marson invested an additional $73,000 and withdrew $33,000 from the business. What is the amount of net income during Year 2, assuming that as of December 31, Year 2, assets were $995,000 and liabilities were $270,000?
A) $45,000
B) $50,000
C) $106,000
D) $370,000

Question

Quizplus · Accepted Answer

The net income can be calculated by determining the change in owner's equity. Owner's equity at the end of Year 1 is $640,000 ($940,000 - $300,000). At the end of Year 2, it is $725,000 ($995,000 - $270,000). The change in equity is $85,000. Considering the additional investment of $73,000 and withdrawal of $33,000, the net income is $45,000 ($85,000 - $73,000 + $33,000).

Abbie Marson Is the Sole Owner and Operator of Great