The total assets and the total liabilities of Smart Financial Services are shown below.The company issued no common stock and paid no dividends during the year. $$\begin{array} { | l | r | r | }
\hline & \text { Assets } & \text { Liabilities } \
\hline \text { Beginning of year } & \$ 425,000 & \$ 280,000 \
\hline \text { End of year } & 500,000 & 325,000 \
\hline
\end{array}$$ What was the amount of net income for the year?

Question

The total assets and the total liabilities of Smart Financial Services are shown below.The company issued no common stock and paid no dividends during the year. $$\begin{array} { | l | r | r | } 
\hline & \text { Assets } & \text { Liabilities } \
\hline \text { Beginning of year } & \$ 425,000 & \$ 280,000 \
\hline \text { End of year } & 500,000 & 325,000 \
\hline
\end{array}$$ What was the amount of net income for the year?

Quizplus · Accepted Answer

Net income can be calculated as Total Assets - Total Liabilities = $300,000 - $270,000 = $30,000. Since the company did not issue any common stock or pay any dividends, the net income for the year is equal to the increase in equity. Therefore, the answer is (C) $30,000.

The Total Assets and the Total Liabilities of Smart Financial