Question

Tamarisk, Inc. started the year with total assets of $310000 and total liabilities of $250000. During the year the business recorded $626000 in revenues, $325000 in expenses, and dividends of $61000. The net income reported by Tamarisk, Inc. for the year was:_______

Answer 1

Answer:

$301,000

Explanation:

The accounting equation shows the relationship between the elements of a balance sheet which are assets liabilities and equity. This may be expressed mathematically as

Assets = Liabilities + Equity

Equity which represents the amount owed to the owners of the business includes retained earnings (which is the accumulation of the net income/loss over the years less dividends paid) and common shares.

Hence,

$310,000 = Equity + $250,000

Equity = $310,000 - $250,000

= $60,000

The net income is the difference between the total sales and total expenses

= $626,000 - $325,000

= $301,000