Heedy Company had the following account balances in 2016 and 2017, respectively.Assuming dividends of $20,000 were paid in 2017, how much was net income? $\begin{array}{lrr}
& \mathbf{2 0 1 7} & \underline{\mathbf{2 0 1 6}} \
\text { Capital Stock } & \$ 42,000 & \$ 40,000 \
\text { Retained Earnings }& x & 210,000 \
\text { Total Stockholders' Equity } & \$ 314,000 & \$ 250,000 \
\end{array}$
A) $62,000
B) $82,000
C) $272,000
D) $252,000

Question

Heedy Company had the following account balances in 2016 and 2017, respectively.Assuming dividends of $20,000 were paid in 2017, how much was net income? $\begin{array}{lrr}
 & \mathbf{2 0 1 7} & \underline{\mathbf{2 0 1 6}} \
\text { Capital Stock } & \$ 42,000 & \$ 40,000 \
\text { Retained Earnings }& x & 210,000 \
\text { Total Stockholders' Equity }  & \$ 314,000 & \$ 250,000 \
\end{array}$
A) $62,000
B) $82,000
C) $272,000
D) $252,000

Quizplus · Accepted Answer

The change in Total Stockholders' Equity from 2016 to 2017 is $314,000 - $250,000 = $64,000. The change in Capital Stock is $42,000 - $40,000 = $2,000. Therefore, the change in Retained Earnings due to operations (net income minus dividends) is $64,000 - $2,000 = $62,000. To find the net income, add the dividends paid ($20,000) back to this amount, resulting in $62,000 + $20,000 = $82,000.

Heedy Company Had the Following Account Balances in 2016 and 2017