Native Dave's Consultants had the following balance sheet amounts at the beginning of the year: During the year,total assets increased by $100,000 and total liabilities increased by $40,000.The company also paid $30,000 in dividends.No other transactions occurred except revenues and expenses.How much is net income for the year?
A)$30,000
B)$60,000
C)$70,000
D)$90,000

Question

Native Dave's Consultants had the following balance sheet amounts at the beginning of the year:  During the year,total assets increased by $100,000 and total liabilities increased by $40,000.The company also paid $30,000 in dividends.No other transactions occurred except revenues and expenses.How much is net income for the year?
A)$30,000 
B)$60,000 
C)$70,000 
D)$90,000

Quizplus · Accepted Answer

Using the accounting equation, we know that:
Total Assets = Total Liabilities + Owner's Equity
At the beginning of the year, the company's Owner's Equity was:
$620,000 - $359,000 = $261,000
At the end of the year, the company's Total Assets increased by $100,000 to:
$720,000
And its Total Liabilities increased by $40,000 to:
$459,000
Substituting these values into the accounting equation, we get:
Total Assets = Total Liabilities + Owner's Equity
$720,000 = $459,000 + Owner's Equity
Owner's Equity = $261,000 + Net Income - Dividends
Substituting the given information, we find:
$720,000 = $459,000 + $261,000 + Net Income - $30,000
$Net Income = $90,000
Therefore, the correct answer is D) $90,000.

Native Dave's Consultants Had the Following Balance Sheet Amounts at the Beginning