The December 31, 2006 Balance Sheet of Business Card's Company shows Assets on the balance sheet of $35,000 and Liabilities of $23,000. During the year 2007, the company issued more stock for $3,500, and paid dividends of $800 to all shareholders. If the December 31, 2007 Balance Sheet shows Assets of $43,000, and Liabilities of $27,000, what must have been the Net Income for the year 2007?
Ending balance of each main account are given as follows (according to the accounting records in year 2006):
Asset = 35000
Liabilities = 23000
By using the accounting equation (A = L + E), we can find that Owner's Equity = 12000.
Ending balance of each main account are given as follows (according to the accounting records in year 2006):
Asset = 35000
Liabilities = 23000
By using the accounting equation (A = L + E), we can find that Owner's Equity = 12000.

The ending balance for this company in 2007 shows:
Asset = 43000
Liabilities = 27000
By using the same method, Equity is calculated using the accounting equation A = L + E.
Equity = 16000
The question is to calculate Net Income.
Net income, dividends, stocks are all part of the owner's equity in the accounting equation.
OE beginning
+Net Income
+Common stock
-(Dividends)
= OE Ending
Calculate Net Income:
12000
+Net Income
+3500
-(800)
=16000
What is net income?
Answer:
Net income = 1300
Additional Links to Accounting Problems and Examples:
Net income = 1300
Additional Links to Accounting Problems and Examples:

1 comment:
i dont understand net profit can someone help me i read the whole thing HELP!!!!!!!!!!!
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