Question

The accounting records of Nettle Distribution show the following assets and liabilities as of December 31, 2018 and 2019. Part 2 December 31 2018 2019 Cash $ 49,760 $ 8,832 Accounts receivable 27,018 21,176 Office supplies 4,261 3,121 Office equipment 130, 790 139,316 Trucks 51,17960,179 Building 170,612 Land @ 42,575 Accounts payable 71,018 35,219 Note payable 113, 187 points 2. Compute net income for 2019 by comparing total equity amounts for these two years and using the following information. During 2019, the owner invested $34.000 additional cash in the business in exchange for common stock) and the company paid a $25.200 cash dividend Equity, December 31, 2018 A Owner's wivestment Notice

Answer 1

2.

Calculation

First, we need to find the equity balances of 2018 and 2019, so we prepare the balancesheet for both years:

Balance Sheet
31-Dec-18
Assets	Amount	Liabilities	Amount
Cash	49,760	Accounts Payable	71,010
Accounts Recievable	27,010
Office supplies	4,261
Trucks	51,179	Total Equity (difference)	191,990
Office equip	130,790
Total Assets	263,000	Total Liabilities and Equity	263,000

Balance Sheet
31-Dec-19
Assets	Amount	Liabilities	Amount
Cash	8,832	Accounts Payable	35,219
Accounts Recievable	21,176	Notes Payable	113,187
Office supplies	3,121	Total Liabilities	148,406
Trucks	60,179	Total Equity (difference)	297,405
Office equip	139,316
Building	170,612
Land	42,575
Total Assets	445,811	Total Liabilities and Equity	445,811

Computation of Net Income
Owner Investment	34000
Add Net income	?
Deduct dividends	25200
Increase In equity during 2019 [note 1]	105415
Net Income =	96615

Note 1
Increase In equity during 2019
Equity Dec 31,2018 (see BS above)	191990
Equity Dec 31,2019(see BS above)	297405
Increase In equity during 2019	105415

3.

Debt Ratio	Total Liabilities / Total Assets
148,406/ 445,811 =	33.3%