As of December 31, 2018, Brookshire Company had assets of $925,000 and liabilities of $285,000. During 2019, the stockholders invested an additional $50,000 and paid dividends of $30,000 from the business.
What is the net income for the company during 2019, assuming that as of December 31, 2019, assets were $980,000, and liabilities were $255,000?
A) $ 85,000
B) $ 65,000
C) $105,000
D) $ 20,000

Question

Quizplus · Accepted Answer

Net income is calculated by finding the change in equity. Initial equity was $640,000 ($925,000 - $285,000). Final equity is $725,000 ($980,000 - $255,000). The change in equity is $85,000 ($725,000 - $640,000). After adjusting for additional investment and dividends, net income is $65,000 ($85,000 - $50,000 + $30,000).

As of December 31, 2018, Brookshire Company Had Assets of $925,000