Company is in the second year of operations. They have total assets of $200,000 at the end of the first year. During the first year, the company incurs liabilities of $75,000 and stockholders invested $80,000 in the form of Paid in Capital. On the assumption no dividends were declared in the first year of operations, what is the amount of net income?

Question

Ishaan Wiggins

Business

3 June, 06:14

Company is in the second year of operations. They have total assets of $200,000 at the end of the first year. During the first year, the company incurs liabilities of $75,000 and stockholders invested $80,000 in the form of Paid in Capital. On the assumption no dividends were declared in the first year of operations, what is the amount of net income?

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Answers (1)

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Paloma Boone · Answer 1

The amount of net income is $45,000

Explanation:

The computation of the net income is shown below:

= Total assets - Liabilities - stockholder equity

= $200,000 - $75,000 - $80,000

= $45,0000

By using the accounting equation, the total assets equal to the total liabilities and stockholder equity

In mathematically,

Total assets = Total liabilities + stockholder equity

But in the given question, the amounts are not equal to each other, so the difference should be termed as net income