Question

Skip to main content

Chapter 2 Homework (required)

AnswerSaved

Help opens in a new windowSave & ExitSubmit

Item4

Part 2 of 3

20points

eBook

Print

References

Check my workCheck My Work button is now enabled

Item 4

Item 4 Part 2 of 3 20 points

Required information

[The following information applies to the questions displayed below.]
  
The accounting records of Nettle Distribution show the following assets and liabilities as of December 31, 2018 and 2019.
  

December 31	2018			2019
Cash	$	64,300		$	15,640
Accounts receivable		26,240			19,100
Office supplies		3,160			1,960
Office equipment		44,000			44,000
Trucks		148,000			157,000
Building		0			80,000
Land		0			60,000
Accounts payable		3,500			33,500
Note payable		0			40,000

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 $35,000 additional cash in the business and withdrew $19,000 cash for personal use.
  

Answer 1

Workings:

We will need to prepare a balance sheet to determine the equity amount Balance Sheet 2018 2019 Assets: Current Assets Cash $ 64,300 $ 15,640 Accounts Receivable $ 26,240 $ 19,100 Office supplies $ 3,160 $ 1,960 Total current assets $ 93,700$ 36,700 Property, plant & equipment Office equipment Trucks Building Land Property, plant & equipment - net $ $ $ $ 44,000 148,000 - - $ $ $ $ 44,000 157,000 80,000 60,000 $ 192,000$ 341,000 Total assets $ 285,700 $ 377,700 Liabilities: Current Liabilities Accounts Payable Notes Payable Total current liabilities $ $ $ 3,500 $ - $ 3,500 $ 33,500 40,000 73,500 Total equity $ 282,200 $ 304,200 Total Liabilities and equity $285,700 $ 377,700 Total Equity = Assets - Current Liabilities Total Equity for 2018 = $285,700 - $3,500 = $282,500 Total Equity for 2019 = $377,700 - $73,500 = $304,200

Final Answer:

Computation of Net Income for 2019 Opening Balance of Shareholders Equity, 1st January 2018 $ 282,200 Add: Investment in business $ 35,000 Less: Cash withdrawals $ (19,000) Closing balance without considering net income as on 31st December $ 298,200 Actual total equity balance as on 31st December $ 304,200 Difference will be net income $ 6,000 ($304,200 - $298,200)