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2 October, 13:00

Company is in the second year of operations. They have total assets of $200,000 at the end of the first year. During the first year, the company incurs liabilities of $75,000 and stockholders invested $80,000 in the form of Paid in Capital. On the assumption no dividends were declared in the first year of operations, what is the amount of net income?

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  1. 2 October, 14:19
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    The amount of net income is $45,000

    Explanation:

    The computation of the net income is shown below:

    = Total assets - Liabilities - stockholder equity

    = $200,000 - $75,000 - $80,000

    = $45,0000

    By using the accounting equation, the total assets equal to the total liabilities and stockholder equity

    In mathematically,

    Total assets = Total liabilities + stockholder equity

    But in the given question, the amounts are not equal to each other, so the difference should be termed as net income
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