A corporation had the following assets and liabilities at the beginning and end of this year. Assets Liabilities Beginning of the year $ 97,000 $ 41,584 End of the year 150,000 60,750 Determine the net income earned or net loss incurred by the business during the year for each of the following separate cases (Net loss amounts should be indicated by a minus sign. Omit the "$" sign in your response):

A corporation had the following assets and liabilities at the beginning and end of this year.

	Assets	Liabilities
Beginning of the year	$ 97,000	$ 41,584
End of the year	150,000	60,750

Determine the net income earned or net loss incurred by the business during the year for each of the following separate cases (Net loss amounts should be indicated by a minus sign. Omit the "$" sign in your response):

a.	Owner made no investments in the business and no withdrawals were paid during the year.

Net income

$

b.	Owner made no investments in the business but dividends were $850 cash per month..

Net income

$

c.	No dividends were paid during the year but the owner did invest an additional $45,000 cash in exchange for common stock.

Net loss

$

d.	Dividends were $850 cash per month and the owner invested an additional $25,000 cash in exchange for common stock.

Net income

$

Explanation:

a. 

	Assets		–	Liabilities		=	Equity
Beginning of the year	$	97,000	–	$	41,584	=	$	55,416
End of the year		150,000	–		60,750	=		89,250
Net increase in equity							$	33,834
Net income							$	33,834

 

Since there were no additional investments or withdrawals, the net income for the year equals the net increase in owner's equity.

b.

Net increase in equity	$	33,834
Add: withdrawals (12 months @ $850)		10,200
Net income	$	44,034

The withdrawals were added back because they reduced equity without reducing income.

c.

Net increase in equity	$	33,834
Less: additional investment		(45,000)
Net loss	$	(11,166)

The investment was deducted because it increased equity without creating income.

d.

Net increase in equity	$	33,834
Add: withdrawals (12 months @ $850)		10,200
Gross increase in equity	$	44,034
Less: additional investment		(25,000)
Net income	$	19,034

 

The withdrawals were added back because they reduced equity without reducing income and the investments were deducted because they increased equity without creating income.