Ashley's Accessory Shop started the year with total assets of $210,000 and total liabilities of $120,000. During the year the business recorded $330,000 in revenues, $165,000 in expenses, and dividends of $60,000. The net income reported by Ashley's Accessory Shop for the year was
A)$120,000.
B)$150,000.
C)$195,000.
D)$165,000.

Question

Quizplus · Accepted Answer

The net income is calculated as revenues - expenses - dividends, which is $330,000 - $165,000 - $60,000 = $105,000. However, we also need to take into account the change in total assets and total liabilities during the year. Total assets increased by $x and total liabilities decreased by $y, resulting in a change in equity of $x - $y. We don't have this information, so we can assume that there were no significant changes in equity during the year. Therefore, the net income reported by Ashley's Accessory Shop for the year was $165,000.

Ashley's Accessory Shop Started the Year with Total Assets of $210,000