Question

Pharoah Company began the year by issuing $77500 of common stock for cash. The company recorded revenues of $783000, expenses of $657000, and paid dividends of $35000. What was Pharoah net income for the year?

Answer 1

Answer:

$126,000

Explanation:

Net income is computed by deducting total expenses from total income.

Accordingly,

net income = total revenue - total expenses

= 783,000 - 657,000

= $126,000

Additional common stock issuance will increase common stock and cash balance (both on the statement of financial position, not the income statement). Dividend payment is deducted after net income, and does not affect net income computation.