Exhibit 2-1 $\begin{array}{lll}
\text { Total Linbilities } & \text { Total Assets } & \
\$ 60,000 & \$ 100,000 & \text { Begiming of the year } \
\$ 325,000 & \$ 500,000 & \text { End of the year }
\end{array}$ Refer to Exhibit 2-1. What is net income, assuming $50,000 of stock was issued and $25,000 of dividends were paid?
A) $110,000
B) $150,000
C) $190,000
D) $15,000

Question

Quizplus · Accepted Answer

Net income can be calculated using the change in equity: Ending Equity = Beginning Equity + Stock Issued + Net Income - Dividends. Beginning Equity = $100,000 - $60,000 = $40,000. Ending Equity = $500,000 - $325,000 = $175,000. So, $175,000 = $40,000 + $50,000 + Net Income - $25,000. Solving for Net Income gives $110,000.

Exhibit 2-1 Refer to Exhibit 2-1