Stosch Company's balance sheet reported assets of $67,000, liabilities of $20,000 and common stock of $17,000 as of December 31, Year 1. Retained earnings on the December 31, Year 2 balance sheet is $38,000 and Stosch paid a $19,000 dividend during Year 2. What is the amount of net income for Year 2?
A)$30,000
B)$27,000
C)$8,000
D)$19,000

Question

Quizplus · Accepted Answer

To find the net income for Year 2, we need to use the following formula:

Net Income = Retained Earnings (end of Year 2) - Retained Earnings (end of Year 1) + Dividends

Using the information given:

Retained Earnings (end of Year 2) = $38,000 
Retained Earnings (end of Year 1) = $17,000 
Dividends = $19,000

Net Income = $38,000 - $17,000 + $19,000 = $27,000

Therefore, the correct answer is B.

Stosch Company's Balance Sheet Reported Assets of $67,000, Liabilities of $20,000