The accounts of Garfield Company with the increases or decreases that occurred during the past year are as follows:
Account Increase Decrease
Cash $25,000
Accounts receivable $(5,000)
Accounts payable (11,000)
Notes payable 16,000
Except for net income,an investment of $3,000 by the owner,and a withdrawal of $11,000 by the owner,no other items affected the owner's capital account.Using the balance sheet equation,compute net income for the past year.

Question

Quizplus · Accepted Answer

Assets = Liabilities + Owner's Equity
Assets Increased by $20,000; Liabilities Increased by $5,000; Therefore, Equity needs to Increase by $15,000.
Change in Equity = Investment + Net Income - Withdrawals
Increase of $15,000 = $3,000 + Net Income - $11,000
$15,000 = Net Income - $8,000
Net Income = $23,000

The Accounts of Garfield Company with the Increases or Decreases