Question

1-4 Calculate Net Income for each of the situations below. a. Revenues = $1,350,000; Expenses = $950,000. b. Revenues = $1,350,000; Expenses = $950,000; Gains $10,000 c Revenues = $1,350,000; Expenses = $950,000; Gains = $10,000; Losses = $5,000. d. Revenues $1,350,000; Expenses = $950,000; Losses = $35,000. e. Revenues = $1,350,000; Expenses = $1,450,000; Gains $10,000 f. Revenues = $1,350,000; Expenses = $1,450,000; Losses = - $10,000. 1-5. Explain the concept of equity.

Answer 1

Part 1-4

	Answer	A	B	C	D	E	F
	Revenues	$      1,350,000	$      1,350,000	$        1,350,000	$       1,350,000	$         1,350,000	$      1,350,000
Add:	Gains		$            10,000	$              10,000		$               10,000
Less:	Expenses	$       (950,000)	$        (950,000)	$         (950,000)	$        (950,000)	$       (1,450,000)	$    (1,450,000)
Less:	Losses			$              (5,000)	$           (35,000)		$          (10,000)
	Net income	$         400,000	$          410,000	$           405,000	$           365,000	$             (90,000)	$        (110,000)

Part 1-5

Equity means the amount invested by the owner.

For non-corporate, Equity means the amount invested by the owner/ partners in the business.

For corporate, Equity means the amount invested by the investors in the business. These investors can be the common stock or preferred stock.

Equity can be calculated by using the accounting equation, Equity = Assets - liabilities

In simple words, Resources available for the owners is called equity.