During Year 3,a company's assets increase by $56,000 and its liabilities increase by $38,000.If no dividends were paid and there were no changes in the amount of common stock issued during the year,net income for Year 3 was:

Question

Quizplus · Accepted Answer

The increase in assets of $56,000 can be attributed to either net income or additional investments made during the year. However, as no dividends were paid and there were no changes in the amount of common stock issued during the year, the increase in liabilities of $38,000 can be assumed to be the result of additional borrowing or credit. Therefore, the net income for Year 3 can be calculated as follows:

Increase in Assets - Increase in Liabilities = Net Income
$56,000 - $38,000 = $18,000

Hence, the best choice is B.

During Year 3,a Company's Assets Increase by $56,000 and Its