Answer:
Ebony Interiors
1. Balance sheets for Ebony Interiors as of February 29 and March 31, 2016:
February 29 March 31, 2016
Cash $337,000 $381,000
Accounts receivable 796,000 952,000
Supplies 33,000 34,000
Total assets $1,166,000 $1,367,000
Accounts payable $329,000 $398,000
Justin Berk, capital 837,000 969,000
Total liabilities + equity $1,166,000 $1,367,000
2. The amount of net income for March, assuming that the owner made no additional investments or withdrawals during the month:
March 31 Capital = $969,000
February 28 Capital (837,000)
Net income $132,000
3. The amount of net income for March, assuming that the owner made no additional investments but withdrew $47,000 during the month:
March 31 Capital = $969,000
Drawings 47,000
February 28 Capital (837,000)
Net income $179,000
Explanation:
a) Data and Calculations:
Financial information for February and March 2016 is as follows:
Accounts payable $329,000 $398,000
Accounts receivable 796,000 952,000
Cash 337,000 381,000
Justin Berk, capital ? ?
Supplies 33,000 34,000
b) Net income can be determined by comparing the beginning capital (equity) with the ending capital balance (equity). This is because equity is equal to the common stock plus the retained earnings or adjusted net income. Personal withdrawals by the owner affect the ending equity, which includes the net income.
