The balance of owner's capital at the beginning of the year and the end of the year was $50,000 and $67,000, respectively. No additional capital was introduced during the year. Withdrawals were $23,000. What was the net income or loss for the year?
A)Net income of $90,000
B)Net loss of $90,000
C)Net loss of $40,000
D)Net income of $40,000

Question

Quizplus · Accepted Answer

To calculate the net income or loss for the year, we need to use the following formula:

Net income/loss = Ending Owner's Capital - Beginning Owner's Capital - Withdrawals

Substituting the given values, we get:

Net income/loss = $67,000 - $50,000 - $23,000
Net income/loss = $(6,000)

Since the result is negative, we have a net loss of $6,000 for the year. Therefore, the correct answer is D, "Net income of $40,000" is not correct because it implies a positive result.

The Balance of Owner's Capital at the Beginning of the Year