Answer:
a) 29,000
b) 44,000
c) -26,000 (loss)
d) 9,000 gain
Explanation:
Net income will be the difference in equity plus dividends less contributions.
[tex]($ending equity - beginning equity) + dividends - contribution[/tex]
To sovle for this we use the accouting equation:
assets = laibilities + equity
the beginning and ending equity is the same for all years:
60,000 = 20,000 + equity
equity = 40,000
ending equity: 105,000 - 36,000 = 69,000
what changes is the value for dividend and contribution
a)
income: 69,000 - 40,000 + 0 - 0 = 29,000
b) 69,000 - 40,000 + 1,250 x 12 - 0 = 44,000
c) 69,000 - 40,000 + 0 - 55,000 = -26,000
d) 69,000 - 40,000 + 1,250 x 12 - 35,000 = 9,000
a. Owner made no investments in the business, and no dividends were paid during the year.
Net Income - equity
69,000 - 40,000 = 29,000
b. Owner made no investments in the business, but dividends were $1,250 cash per month.
Net Income - equity + dividends
69,000 - 40,000 + 1250 * 12 = 44,000
c. No dividends were paid during the year, but the owner did invest an additional $55,000 cash in exchange for common stock.
Net Income - equity + dividends - Cash exchange
69,000 - 40,000 + 15,000 - 55,000 = -26,000
d. Dividends were $1,250 cash per month, and the owner invested an additional $35,000 cash in exchange for common stock
Net Income - equity + dividends - Cash exchange
69,000 - 40,000 + 15,000 - 35,000 = 9,000
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