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3 June, 16:48

Select balance sheet data for Bach, Inc. is presented below: Mar 31, 20XX Apr 30, 20XX Assets $116,000 $192,000 Liabilities 47,000 53,000 Common Stock 14,000 14,000 Bach did not pay any dividends during this period. What is the net income for April?

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  1. 3 June, 17:08
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    The net income for the month of April is $70,000

    Explanation:

    By using the Accounting equation, we will determine the ending and beginning retained earnings is as:

    The accounting equation is

    Assets = Liabilities + Shareholder's equity

    Assets = Liabilities + (Common Stock + Retained Earnings [RE])

    $116,000 = $47,000 + ($14,000 + RE)

    RE = $116,000 - $47,000 - $14,000

    Beginning RE = $55,000

    Computing ending RE as:

    Ending RE = Assets - Liabilities - Common Stock

    = $192,000 - $53,000 - $14,000

    = $125,000

    Now computing the Net Income as:

    Beginning RE + Net Income (NI) = Ending Inventory

    $55,000 + NI = $125,000

    NI = $125,000 - $55,000

    NI = 70,000
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