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Viefleur [7K]
3 years ago
9

The following information relates to Novak Corp. for the year 2022. Retained earnings, January 1, 2022 $58,560 Advertising expen

se $2,200 Dividends during 2022 6,100 Rent expense 12,690 Service revenue 76,250 Utilities expense 3,780 Salaries and wages expense 34,160 Other comprehensive income (net of tax) 490 After analyzing the data, compute net income.
Business
1 answer:
lions [1.4K]3 years ago
7 0

THE NOVAK CORP. NET INCOME $23640 AND RETAINED EARNING IS $76100.

Explanation:

To calculate the net income of NOVAK CORP. is

           PARTICULAR                                           AMOUNT(IN $)

       SERVICE REVENUE                                      76250

    COMPREHENSIVE INCOME                            490

LESS:ADVERTISING EXPENSE                             2200

         SALARIES AND WAGES                              34160

          UTILITIES EXPENSE                                    3780

          <u>   RENT EXPENSE </u>                                       <u>12960</u>

               NET INCOME                                          23640

NOVAK CORP. RETAINED INCOME FOR THE YEAR 2022,31 DECEMBER

PARTICULAR                                                         AMOUNT(IN $)    

RETAINED EARNING                                                 58560

+<u>NET INCOME</u>                                                             <u>23640</u>

                                                                                     82200

LESS: DIVIDEND                                                           <u>6100</u>

RETAINED EARNING ON 31,DECEMBER                     76100

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Company's comparative balance sheet E(Click the icon to view the comparative balance sheet.) t January 31, 2019, and 2018, repor
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Answer:

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Calculation of Net Income or Net Loss during the year ended January 31, 2019, under three independent situations:

Situation 1. Bosley issued $5 million of stock and declared no dividends.  

Net Loss = stockholders' equity, January 31, 2018 plus new issue of stock less stockholders' equity, January 31, 2019

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Situation 2. Bosley issued no stock but declared dividends of $8 million.

Net loss = stockholders' equity, January 31, 2018 less (dividends + stockholders' equity, January 31, 2019)

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Explanation:

a) Data and Calculations:

                                         2018    2019

Total assets                         74       48  

Total liabilities                     23       17  

Total stockholders' equity  51       31

Stockholders' equity according to the accounting equation = Assets minus Liabilities for each year.

b) Situation 1. Bosley issued $5 million of stock and declared no dividends.  

                                                                       ($' million)

Total stockholders' equity, January 31, 2018   51

Add: Issuance of stock                                       5

Net income                                                           0

Less: Dividends declared                                   0

Net loss                                                            (25 )

Total stockholders' equity, January 31, 2019   31

Net Loss = stockholders' equity, January 31, 2018 plus new issue of stock less stockholders' equity, January 31, 2019

= $51 + 5 - 31 = $25 million

c) Situation 2. Bosley issued no stock but declared dividends of $8 million.  

                                                                       ($' million)

Total stockholders' equity, January 31, 2018   51

Add: Issuance of stock                                       0

Net income                                                          0

Less: Dividends declared                                 (8 )

Net loss                                                             (12 )

Total stockholders' equity, January 31, 2019  31

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= $51 - (8 + 31) = $12 million

d) Situation 3. Bosley issued $10 million of stock and declared dividends of $50 million

                                                                    ($' million)

Total stockholders' equity, January 31, 2018  51

Add: Issuance of stock                                     10

Net income                                                       20

Less: Dividends declared                               (50 )

Net loss                                                              0

Total stockholders' equity, January 31, 2019 31

Net income = (stockholders' equity, January 31, 2019 plus dividends) minus (stockholders' equity, January 31, 2018 plus Issuance of stock)

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Variable cost: $0.26

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2.

The average cost per cup of coffee served decreases as the number of cups of coffee served in a week increases.

This is because average cost per cup of coffee served is equal to the sum of allocated fixed cost to one cup of coffee + variable cost of one cup of coffee. Although the variable cost of one cup of coffee remains the same given changes in the number of cups served, the allocated fixed cost to one cup of coffee decreases as the cups served increases as Total fixed cost remained the same, yet it will be allocated to more cup served, so the amount allocated to one cup served will decreases.

A formula will make it easy to understand:

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Explanation:

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