Question

As of the end of its accounting period, December 31, Year 1, Great Plains Company has assets of $919,225 and liabilities of $267,792. During Year 2, stockholders invested an additional $28,519 and received $25,848 in dividends from the business. What is the amount of net income during Year 2, assuming that as of December 31, Year 2, assets were $980,508 and liabilities were $239,394?

Answer 1

Answer:

$87.010

Explanation:

First of all  you should apply the accounting equation : Assests= Liabialities+ equity, you need to find the Equity according with the information of the excercise:

Equity= Assests- liabilities

Equity year 1  =  919.225 -  267.792   =   651.433    

After of have this result, you should add the investment and substract the dividends paied to the stockholders .

Provisional Equity year 2 = 651.433  -  28.519 + 25.848    

Privisional Equity Year 2=   654.104

Now you have to calculate the total Equity of the year 2 with the information:

Equity 2:  980.508  -  239.394 =  741.114    

Now you have to substract the Equity year 2 with the provisional Equity

Net Income = 741.114  -  654.104 =  87.010