Question

Gerardi Supply started the year with total assets of $210,000 and total liabilities of $85,000. During the year, the business recorded $275,000 in revenues, $120,000 in expenses, and dividends of $50,000. The net income reported by Gerardi Supply for the year was:

Answer 1

Answer:

$155.000

Explanation:

According with the information the person has first calculate the Equity. According with the accounting equation the Assets are equal to Liabilities plus the Equity. The first step is found the equity of the next way:

Equity year 1= Assets- Liabilities  

Equity year 1= $210,000 - $85,000

Equity year 1= $125.000

Equity year 1= 125.000- 50.000 (dividends) = $75.000  

Nevertheless, the calculation of the net income is measure independent of the operations in the balance sheet.  

After you need to calculate the net income:

Net income= Revenues- Expenses  

Net income= $275,000- $120,000

Net income= $155.000

As you can see the operations in the income statement only affects are affects by the revenue and the expenses.