Allen Marks is the sole owner and operator of Great Marks Company. As of the end of its accounting period, December 31, 2013, Great Marks Company has assets of $940,000 and liabilities of $300,000. During 2014, Allen Marks invested an additional $73,000 and withdrew $33,000 from the business. What is the amount of net income during 2014, assuming that as of December 31, 2014, 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 is calculated as the change in equity, which is equal to the change in assets minus the change in liabilities, plus the owner's investments minus the owner's withdrawals. In this case, the change in assets is $995,000 - $940,000 = $55,000, the change in liabilities is $270,000 - $300,000 = -$30,000, the owner's investments are $73,000, and the owner's withdrawals are $33,000. Therefore, the net income is $55,000 - (-$30,000) + $73,000 - $33,000 = $45,000.

Allen Marks Is the Sole Owner and Operator of Great