Question

For the current accounting year, beginning and ending total liabilities were $15,000 and $31,000, respectively. At year-end, owner's equity amounted to $29,000, and total assets were $21,000 larger than at the beginning of the year. If the owner's capital contributions for the year amounted to $5,000 and dividends paid to owners totaled $2,000, net income or net loss for the year was

Answer 1

Answer:

$8,000

Explanation:

Changes during the year :

Liabilities = $16,000 Increase ($31,000 - $15,000)

Assets = $21,000 Increase

Accounting Equation states that :

Assets = Equity + Liabilities

Change in equity during the year will be :

Equity = Assets - Liabilities

           = $5,000

Causes of change in equity :

Capital                         $5,000

Add Dividends           ($2,000)

Add Change                $5,000

Profit during the year  $8,000

therefore,

Net Income for the year was $8,000