On January 1, 2011, Affleck Company reported equity of $470,000.During the year, the company paid dividends of $20,000.At December 31, 2011, the amount of equity was $500,000.What amount of net income or net loss would the company report for 2011?

Question

Quizplus · Accepted Answer

The change in equity from January 1 to December 31 is $30,000 ($500,000 - $470,000). Since dividends of $20,000 were paid, the net income must have been $50,000 to result in the $30,000 increase in equity ($50,000 net income - $20,000 dividends = $30,000 increase in equity).

On January 1, 2011, Affleck Company Reported Equity of $470,000