Question

A tabular analysis of the transactions made during August 2022 by Ivanhoe Company during its first month of operations is shown below. Each increase and decrease in stockholders' equity is explained. Assets = Liabilities + Stockholders' Equity Cash + A/R + Supp. + Equip. = Accounts Payable+ Common Stock+ Retained Earnings Revenues- Expenses- Dividends 1. $21,700 $21,700 2. -1,000 $5,000 $4,000 3. -950 $950 3,100 $6,200 $9,300 Serv. Rev. 5. -2,200 -2,200 6. -1,900 -$1,900 -730 -$730 Rent Exp. 8. 550 -550 9. -3,700 -3,700 Salar. Exp. 10. Util. Exp. 5720*5.90 Rent BV 370 -370 (b) Determine how much stockholders' equity increased for the month. Increase in stockholders' equity s (c) Compute the net income for the month. The net incomes

Answer 1

b.

This is increased by the amount of retained earnings.

Increased in SE = Revenues – Expenses – Dividends

                        = 9,300 – (730 + 3,700 + 370) – 1,900

                        = 9,300 – 4,800 – 1900

                        = 2,600 (Answer)

c.

Only the amount of dividend in retained earnings should not be considered here.

Net income = Revenues – Expenses

                    = 9,300 – (730 + 3,700 + 370)

                    = 9,300 – 4,800

                    = 4,500 (Answer)