At the end of its first year of operations,Lockerbie and Role Company has total assets of $3,000,000 and total liabilities of $1,200,000.The owner originally invested $200,000 in the business,but has not made any further investments or taken any withdrawals.What is the first year's net income for Lockerbie and Role Company?

Question

Quizplus · Accepted Answer

The net income can be calculated using the accounting equation: Assets = Liabilities + Owner's Equity. Owner's Equity = Assets - Liabilities = $3,000,000 - $1,200,000 = $1,800,000. Since the owner originally invested $200,000, the net income is $1,800,000 - $200,000 = $1,600,000.

At the End of Its First Year of Operations,Lockerbie and Role