The changes in account balances of the Clearwater Corporation during 2011 are presented below:

Assuming there are no changes in retained earnings except for net income and a dividend payment of $19,500, the net income for 2011 should be

Question

The changes in account balances of the Clearwater Corporation during 2011 are presented below:

Assuming there are no changes in retained earnings except for net income and a dividend payment of $19,500, the net income for 2011 should be

Quizplus · Accepted Answer

To determine net income, we need to look at the change in retained earnings. We know that there was a dividend payment of $19,500, which means the Retained Earnings account decreased by that amount. The only other change in Retained Earnings would be from net income. To calculate net income, we must subtract the decrease in Retained Earnings ($19,500) from the change in total equity ($33,000).

Net Income = Change in Equity - Dividends
Net Income = $33,000 - $19,500
Net Income = $13,500

The Changes in Account Balances of the Clearwater Corporation During