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Allen Marks is the sole stockholder of Great Marks Company. As of the end of its accounting period, December 31, 2011, Great Marks Company has assets of $940,000 and liabilities of $300,000. During 2012, Allen Marks purchased an additional $65,000 of capital stock and received $45,000 in cash dividends from the business. What is the amount of net income during 2012, assuming that as of December 31, 2012, assets were $995,000, and liabilities were $270,000?

Answer :

Answer:

$65,000

Explanation:

The computation of  the net income is shown below:

As we know that

Ending balance of capital account = Beginning balance of capital account + net income - the withdrawn amount  + additional amount invested

where,

Ending balance of capital account equal to

= Ending balance of total assets - ending balance of total liabilities

= $995,000 - $270,000

= $725,000

And, the opening balance of capital account equal to

= Opening balance of total assets - opening balance of total liabilities

= $940,000 - $300,000

= $640,000

So, the net income is

$725,000 = $640,000 + net income - $45,000 + $65,000

So, the net income equal to $65,000

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