Question

A company had the following assets and liabilities at the beginning and end of the current year:Assets LiabilitiesBeginning of year $ 220,000 $ 91,000End of the year 251,000 76,200Common stock in the amount of $18,000 was issued and dividends of $5,600 were paid during the year. What is the amount of net income for the year?

Answer 1

Answer:

$33,400 = Net income

Explanation:

Given that,

Assets in the beginning = $220,000

Liabilities in the beginning = $91,000

Ending assets = 251,000

Ending liabilities = 76,200

Common stock issued = $18,000

Dividends paid = $5,600

Accounting equation is as follows:

Total assets = Total liabilities + Total equity

Beginning assets = Beginning liabilities + Beginning equity

$220,000 = $91,000 + Beginning equity

$220,000 - $91,000 = Beginning equity

$129,000 = Beginning equity

Therefore,

Ending equity = Ending assets - Ending liabilities

                       = $251,000 - $76,200

                       = $174,800

Ending equity = Beginning equity + Issue of common stock + Net income - Dividends

$174,800 = $129,000 + $18,000 + Net income - $5,600

$33,400 = Net income

Answer 2

Net income for the year is $33,400

Net income:

Given:

Beginning Assets  = $220,000

Beginning Liabilities = $91,000

Ending assets = 251,000

Ending liabilities = 76,200

Common stock = $18,000

Dividends paid = $5,600

Computation:

Beginning assets = Beginning liabilities + Beginning equity

Beginning equity = $220,000 - $91,000

Beginning equity = $129,000

Ending equity = Ending assets - Ending liabilities

Ending equity = $251,000 - $76,200

Ending equity = $174,800

Ending equity = Beginning equity + Issue of common stock + Net income - Dividends

$174,800 = $129,000 + $18,000 + Net income - $5,600

Net income = $33,400

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