Question

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1. The total assets and the total liabilities of a particular business enterprise at the beginning and at the end of the year are stated below. During the year, dividends of $30,000 were paid and $25,000 of additional capital stock was issued. What was the amount of net income for the year? Assets Liabilities Beginning of year End of year $290,000 355,000 $190,000 220,000 1 I

Answer 1

Computation of Net Income for the Year Particulars Assets end of year Liabilities end of year Amount($) Explanation 355000 -220000 Less: 135000 Capital Balance at year end Opening capital balance Less : -100000 290000 - 190000 Add: Less: Increase in capital balance during year Dividends Additional capital issued 35000 30000 dividend as already deducted has to be reversed to determine net income -25000 Capital raised has to be excluded from the net income Answer -------------> Net Income 40000

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