Georgio Company began 2014 with net assets of $80,000. Net income calculated by using the capital maintenance concept was $21,000. During 2014 owners contributed $26,000 of new capital. By year-end, the net assets totaled $78,000. Dividends to the owners during 2014 were
A) $49,000
B) $28,000
C) $23,000
D) $2,000

Question

Quizplus · Accepted Answer

The change in net assets is calculated as: Ending net assets ($78,000) - Beginning net assets ($80,000) = -$2,000. The net income was $21,000, and new capital contributions were $26,000. Therefore, dividends must have been $49,000 to account for the decrease in net assets: $80,000 + $21,000 + $26,000 - $49,000 = $78,000.

Georgio Company Began 2014 with Net Assets of $80,000