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Charra [1.4K]
3 years ago
5

As of the end of its accounting period, December 31, Year 1, Great Plains Company has assets of $940,000 and liabilities of $300

,000. During Year 2, stockholders invested an additional $73,000 and received $33,000 in dividends from the business. What is the amount of net income during Year 2, assuming that as of December 31, Year 2, assets were $995,000 and liabilities were $270,000?
Business
1 answer:
Anvisha [2.4K]3 years ago
4 0

Answer:

Th answer is: net income for year 2 is $45,000

Explanation:

We must first determine the equity for both years (equity= assets - liabilities)

  • Equity year 1 = $940,000 - $300,000 = $640,000
  • Equity year 2 = $995,000 - $270,000 = $725,000

Then we calculate the change in equity:

  • change in equity = $725,000 - $640,000 = $85,000

Finally to determine the net income or year 2 we use the following formula:

Net income (Y2)= change in equity - additional investments + dividends paid

net income (Y2) = $85,000 -$73,000 + $33,000 = $45,000

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[The following information applies to the questions below.]
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