Question

Hawke Company had the following assets and liabilities on the dates indicated. December 31 Total Assets Total Liabilities 2019 $400,000 $250,000 2020 $460,000 $300,000 2021 $590,000 $400,000 Hawke began business on January 1, 2019, with an investment of $100,000. From an analysis of the change in owner’s equity during the year, compute the net income (or loss) for: (a) 2019, assuming Hawke’s drawings were $12,000 for the year. for 2019 $ (b) 2020, assuming Hawke made an additional investment of $34,000 and had no drawings in 2020. for 2020 $ (c) 2021, assuming Hawke made an additional investment of $12,000 and had drawings of $25,000 in 2021.

Answer 1

Answer:

2019:- 62000 Income ; 2020:- 24000 loss ;  2021:- 43000 Income

Explanation:

Assets - Liabilities = Capital   (Closing / Opening both)

Profit = Closing Capital - Opening Capital + Drawings - Additional Capital

(Opening Capital = 1st Jan , Closing Capital = 31st Dec) here

2019

Closing Capital = Closing Assets - Closing Liabilities  

400000 - 250000 = 150000

Profit = Closing Capital - Opening Capital + Drawings - Additional Capital

= 150000 - 100000 + 12000 =  62000 Income

2020

2020 Opening Capital = 2019 Closing Capital = 150000

Closing Capital =  Closing Assets - Closing Liabilities  

460000 - 300000 = 160000

Profit = Closing Capital - Opening Capital + Drawings - Additional Capital

160000 - 150000 - 34000 = 24000 loss

2021

2021 Opening Capital = 2020 Closing Capital = 160000

Closing Capital =  Closing Assets - Closing Liabilities  

590000 - 400000 = 190000

Profit = Closing Capital - Opening Capital + Drawings - Additional Capital

190000 - 160000 + 25000 - 12000 = 43000 Income