Exhibit 2-1

-Refer to Exhibit 2-1.What is net income,assuming $50,000 of stock was issued and no dividends were paid?
A)$110,000
B)$85,000
C)$70,000
D)$200,000

Question

Exhibit 2-1
 
-Refer to Exhibit 2-1.What is net income,assuming $50,000 of stock was issued and no dividends were paid?
A)$110,000 
B)$85,000 
C)$70,000 
D)$200,000

Quizplus · Accepted Answer

Net income is calculated as total revenue minus total expenses. In this exhibit, total revenue is $300,000 and total expenses are $165,000, which gives a net income of $135,000. However, $50,000 of stock was issued which is a financing activity and is not included in the net income calculation. Therefore, the net income is reduced by $50,000, giving a total of $85,000 (Option B).

Exhibit 2-1 -Refer to Exhibit 2-1.What Is Net Income,assuming $50,000 of Stock