A company had the following assets and liabilities at the beginning and end of the current year: $\begin{array}{lrr}
& \text { Assets } & \text { Liabilities } \
\text { Beginning of year } & \$ 428,000 & \$ 176,000 \
\text { End of the year } & 490,000 & 150,000
\end{array}$ Common stock in the amount of $30,000 was issued and dividends of $10,000 were paid during the year.What is the amount of net income for the year?
A)$88,000.
B)$68,000.
C)$48,000.
D)$108,000.

Question

A company had the following assets and liabilities at the beginning and end of the current year: $\begin{array}{lrr} 
& \text { Assets } & \text { Liabilities } \
\text { Beginning of year } & \$ 428,000 & \$ 176,000 \
\text { End of the year } & 490,000 & 150,000
\end{array}$ Common stock in the amount of $30,000 was issued and dividends of $10,000 were paid during the year.What is the amount of net income for the year?
A)$88,000.
B)$68,000.
C)$48,000.
D)$108,000.

Quizplus · Accepted Answer

To find the net income, we first calculate the change in equity. The change in assets is $490,000 - $428,000 = $62,000. The change in liabilities is $150,000 - $176,000 = -$26,000. So, the net change in equity is $62,000 - (-$26,000) = $88,000. After accounting for the $30,000 from issued common stock, we have $88,000 - $30,000 = $58,000. Finally, since dividends reduce equity, we add back the $10,000 paid in dividends to find the net income: $58,000 + $10,000 = $68,000.

A Company Had the Following Assets and Liabilities at the Beginning