Question

Carpenter is the sole stockholder and operator of a consulting firm. At the end of its accounting period, December 31, 2015, XYZ, Inc. has assets of $400,000 and liabilities of $145,000.

1. Stockholder’s equity on 12/31/2015.

2. The amount and direction (increase or decrease) change in stockholder’s equity if, during 2016, assets increased by $45,000 and liabilities decreased by $10,000.

3. Net income (or net loss) during 2016, assuming that as of December 31, 2016, assets were $410,000, liabilities were $147,000, capital stock of $3,000 was issued, and dividends of $8,000 were paid.

Answer 1

a.	Stockholders' Equity as of December 31, 2015						$255,000
	Working:
	Stockholders' Equity			=	Assets-Liabilities
				=	$400,000	-	$145,000
				=	$255,000
b.	Stockholders' Equity as of December 31, 2016						$ 6,31,010
	Working:
	Ending Stockholders Equity			=	Beginning Stockholders Equity+Increase in Assets+ decrease in Liability
				=	$255,000	+	$45,000	+	$10,000
				=	$310,000
c	Net Income (or Net Loss) during 2016				$ 3,13,390
	Working:
	Step-1:Stockholders Equity as of December 31, 2016
	Stockholder Equity		=	Assets-Liability
			=	$410,000	-	$147,000
			=	$263,000
	Step-2:Calculate Net Income or Net Loss
	Stockholders Equity-December 2016				$263,000
	Stockholders Equity-December 2015				$255,000
	Capital Stock				($3,000)
	Dividends				($8,000)
	Net Income (or Net Loss) during 2016				$258,000