On January 1,Year 2,Chavez Company had beginning balances as follows: total assets of $12,500,total liabilities of $4,500,and common stock of $3,000.During Year 2,Chavez paid dividends to its stockholders of $2,000.Given that retained earnings amounted to $6,000 at the end of Year 2,what was Chavez's net income for Year 2?
A)$3,000
B)$5,000
C)$7,000
D)$2,000

Question

Quizplus · Accepted Answer

On January 1,Year 2:
Assets = Liabilities + Common Stock + Retained Earnings
$12,500 = $4,500 + $3,000 + Retained Earnings
Retained Earnings = $5,000
During Year 2:
Beginning retained earnings + Net income - Dividends = Ending retained earnings
$5,000 + Net Income - $2,000 = $6,000
Net Income = $3,000

On January 1,Year 2,Chavez Company Had Beginning Balances as Follows