## Monday, March 22, 2010

### Net Income Practice Problem

Solve for net income with the following facts:

Last year, beginning and ending total liabilities were \$8,400 and \$10,000, for a small local business.

At year-end, the owner's equity was \$26,000 and the company had total assets that were \$2,000 larger than at the beginning of this year.

If new capital stock issued exceeded dividends by \$2,400,  calculate net income or net loss for the year?

Accounting Solution to Net Income Problem:

Capital Accounting ending \$26,000
Total Liabilities Accounting ending \$10,000

The company's Assets ending \$36,000

Assets ending is larger than \$2,000 at the beginning of the year.  Thus, the beginning total assets is \$34,000. With beginning total assets of \$34,000 and beginning liabilities of \$8,400 our beginning total stockholders equity would be \$25,600.

Capital ending P26,000.00
Dividends 2,400.00

Total \$28,400.00
Less Capital, beginning 25,600.00

Net income answer is \$ 2,800.00