Native Mike's Consultants had the following balance sheet amounts at the beginning of the year: During the year, total assets increased by $100,000 and total liabilities increased by $40,000.The company also paid $30,000 in dividends.No other transactions occurred except revenues and expenses.How much is net income for the year?
A)$30,000
B)$60,000
C)$70,000
D)$90,000

Question

Native Mike's Consultants had the following balance sheet amounts at the beginning of the year:  During the year, total assets increased by $100,000 and total liabilities increased by $40,000.The company also paid $30,000 in dividends.No other transactions occurred except revenues and expenses.How much is net income for the year?
A)$30,000 
B)$60,000 
C)$70,000 
D)$90,000

Quizplus · Accepted Answer

Net income can be calculated as follows:

Net Income = Revenues - Expenses - Dividends

Since no information is given about the revenues or expenses, we can use the information provided about the changes in assets and liabilities to calculate the change in equity (which is equal to net income + dividends).

Change in Equity = Change in Assets - Change in Liabilities - Dividends 
Change in Equity = $100,000 - $40,000 - $30,000 = $30,000

Net Income + Dividends = Change in Equity 
Net Income + $30,000 = $30,000 
Net Income = $30,000

Therefore, the best choice is D.

Native Mike's Consultants Had the Following Balance Sheet Amounts at the Beginning