Question

Required information [The following information applies to the questions displayed below.) Bennett Griffin and Chula Garza organized Cole Valley Book Store as a corporation; each contributed $70,300 cash to start the business and received 4,800 shares of common stock. The store completed its first year of operations on December 31, current year. On that date, the following financial items for the year were determined: December 31, current year, cash on hand and in the bank, $70,250; December 31, current year, amounts due from customers from sales of books, $42,500; unused portion of store and office equipment, $74,000; December 31, current year, amounts owed to publishers for books purchased, $13,800; one-year note payable to a local bank for $3,500. No dividends were declared or paid to the stockholders during the year. 2. What was the amount of net income for the year? (Hint: Use the retained earnings equation (Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings) to solve for net income.)

Answer 1

Answer

• Requirement 2

>Ending Retained earnings = Assets – Liabilities – Common Stock

Assets:
Cash	$70,250
Accounts receivables	$42,500
Office equipment	$74,000
Total Assets	$186,750
Liabilities:
Accounts payable	$13,800
Notes payable	$3,500
Total Liabilities	$17,300
Common Stock:
$ 70300 x 2 investors	$140,600
Ending Retained earnings balance	$28,850

Beginning Retained earnings + Net Income – Dividends = Ending retained earnings.
> $ 0 + Net Income - $ 0 = $ 28,850
Net Income = $ 28,850

• Answer
  Amount of net income for the year = $ 28,850