Carter Company issued ordinary shares to Sam Carter in exchange for his investment of $40,000 cash in the business. The company recorded revenues of $370,000, expenses of $320,000, and paid dividends of $20,000. What was Carter's net income for the year?

Question

Quizplus · Accepted Answer

Net income is calculated as revenues minus expenses minus dividends, which gives us $370,000 - $320,000 - $20,000 = $30,000. However, this net income is for the company as a whole and does not factor in Sam Carter's investment. Since he is the only shareholder, his net income for the year is equal to the company's net income, which is $30,000.

Carter Company Issued Ordinary Shares to Sam Carter in Exchange