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4 August, 12:28

The balance sheet of Sand Sportswear reports total equity of $500,000 and $650,000 at the beginning and end of the year, respectively. The return on equity for the year is 20%. What is Sand Sportswear's net income for the year

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  1. 4 August, 12:55
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    Sand Sportswear's net income for the year is $115,000

    Explanation:

    In order to calculate the net income for the year we would have to us the following formula:

    Return on equity = Net income / Average total equity

    Return on equity=20%

    Average total equity = ($500,000 + $650,000) / 2 = $575,000

    Therefore, Net income=Average total equity*Return on equity

    Net income=$575,000*20%

    Net income=$115,000

    Sand Sportswear's net income for the year is $115,000
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