The total assets and the total liabilities of Ty Williams Financial Services,are shown below.During the year,the proprietor made no additional capital contributions,and took drawings 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 Financial Services,are shown below.During the year,the proprietor made no additional capital contributions,and took drawings 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 owner's equity is calculated as: Ending Equity - Beginning Equity. Beginning Equity = $395,000 - $290,000 = $105,000. Ending Equity = $455,000 - $320,000 = $135,000. Change in Equity = $135,000 - $105,000 = $30,000. Since there were drawings of $15,000, the net income is $30,000 + $15,000 = $45,000.

The Total Assets and the Total Liabilities of Ty Williams