The total assets and the total liabilities of Ty Williams, CPA, PC are as follows. During the year, the corporation paid dividends of $15,000.
$$\begin{array} { | l | r | r | }
\hline & \text { Assets } & \text { Liabilities } \
\hline \text { Beginning of year } & \$ 395,000 & \$ 290,000 \
\hline \text { End of year } & 455,000 & 320,000 \
\hline
\end{array}$$ What was the amount of net income for the year?
A) $ 85,000
B) $ 40,000
C) $ 45,000
D) $135,000

Question

The total assets and the total liabilities of Ty Williams, CPA, PC are as follows. During the year, the corporation paid dividends of $15,000.
$$\begin{array} { | l | r | r | } 
\hline & \text { Assets } & \text { Liabilities } \
\hline \text { Beginning of year } & \$ 395,000 & \$ 290,000 \
\hline \text { End of year } & 455,000 & 320,000 \
\hline
\end{array}$$ What was the amount of net income for the year?
A) $ 85,000
B) $ 40,000
C) $ 45,000
D) $135,000

Quizplus · Accepted Answer

The change in equity is calculated as the change in assets minus the change in liabilities. The change in assets is $455,000 - $395,000 = $60,000. The change in liabilities is $320,000 - $290,000 = $30,000. Therefore, the change in equity is $60,000 - $30,000 = $30,000. Since dividends of $15,000 were paid, the net income is $30,000 + $15,000 = $45,000.

The Total Assets and the Total Liabilities of Ty Williams