Question

Owner made no investments in the business, and no dividends were paid during the year. Owner made no investments in the business, but dividends were $700 cash per month. No dividends were paid during the year, but the owner did invest an additional $45,000 cash in exchange for common stock. Dividends were $700 cash per month, and the owner invested an additional $35,000 cash in exchange for common stock. Determine the net income earned or net loss incurred by the business during the year for each of the above separate cases: (Decreases in equity should be indicated with a minus sign.)

Answer 1

Answer:

scenario 1

owner made no investment in the business and no dividend were paid during the year, there may be no income or net loss incurred by the business. there is no decrease or increase in equity.

scenario 2

owner made no investments in the business but dividend were $700 cash per month, the net income earned during the year equal $700*12 = $8,400.  There is no changes in equity

scenario 3

No dividend were paid during the year but owner invested an additional $45,000 cash in exchange for common stock.  There will be increase in equity by $45,000 but net income or net loss cannot be determined

scenario 4

Dividend were $700 cash per month and the owner invested additional $35,000 cash in exchange for common stock.  The net Income earned will $8,400 while $35,000 will added to equity as additional capital.

Explanation: