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Beginning stockholders' equity was $120,000. Ending stockholders' equity was $195,000. Additional issuances of capital stock during...

Beginning stockholders' equity was $120,000. Ending stockholders' equity was $195,000. Additional issuances of capital stock during the year amounted to $18,000. Dividends during the year amounted to $12,000. How much was net income for the year?

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Answer #1

Net income = $69,000

Net income and Additional issue of capital increases the owner’s equity on the other hand Dividends decreases owner’s equity.

Net income is added to owner’s equity fund, precisely net income increases retained earnings and dividends decrease retained earnings accounts which is a part of owner’s equity.

Calculation if Net income

A

Beginning stockholder's equity

$    1,20,000.00

B

Additional capital issued

$        18,000.00

C

Less: Dividends paid

$        12,000.00

D=A+B-C

Subtotal

$    1,26,000.00

E

Ending stockholder's equity

$    1,95,000.00

F=E-D

Net income earned

$        69,000.00

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