Accounting Equation II

Accounting Equation II

Murillo Company had assets of $140,000 and liabilities of $60,000 at the beginning of the year, and assets of $200,000 and liabilities of $70,000 at the end of year. During the year, there was an investment of $20,000in the business, and dividends of $24,000 were paid. What amount of net income during of the year?

Answer:                         Assets          =        Liabilities       +        Stockholder’s equity

          Beginning of year    $140,000               60,000                             80,000

          Ending of year        200,000                 70,000                             130,000

                   Investment = 20,000; Dividends = 24,000; and Net Income =?

By: Beginning of Balance + Investment + Net Income – Dividends = Ending of balance

ð  Net Income = Ending of balance – Beginning of balance –Investment + Dividends

ð  130,000 – 80,000 – 20,000 + 24,000 = 54,000

ð  Net Income = $54,000