A company had the following balance sheet amounts at the beginning of the year: During the year, total assets increased by $350,000, total liabilities increased by $100,000, and dividends were paid in the amount of $300,000. No other transactions occurred except revenues and expenses. How much is net income for the year?

Question

A company had the following balance sheet amounts at the beginning of the year:  During the year, total assets increased by $350,000, total liabilities increased by $100,000, and dividends were paid in the amount of $300,000. No other transactions occurred except revenues and expenses. How much is net income for the year?

Quizplus · Accepted Answer

The change in total assets ($350,000) must equal the change in liabilities ($100,000) plus the change in equity including net income and dividends. Therefore, the change in equity is $250,000 ($350,000 - $100,000). Since dividends were paid in the amount of $300,000, the net income for the year must be $550,000 ($250,000 + $300,000). Therefore, the correct answer is D) $550,000.

A Company Had the Following Balance Sheet Amounts at the Beginning