At the end of its first year of operations, Lockerbie and Role Company has total assetsof $3,000,000 and total liabilities of $1,200,000. The owner originally invested$200,000 in the business, but has not made any further investments or taken any withdrawals. What is the first year's net income for Lockerbie and Role Company?
A)$3,200,000.
B)$3,000,000.
C)$1,000,000.
D)$1,800,000.
E)$1,600,000.

Question

Quizplus · Accepted Answer

The net income can be calculated using the accounting equation: Assets = Liabilities + Owner's Equity. Owner's Equity = Assets - Liabilities = $3,000,000 - $1,200,000 = $1,800,000. Since the owner originally invested $200,000, the net income is $1,800,000 - $200,000 = $1,600,000.

At the End of Its First Year of Operations, Lockerbie