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31 July, 16:17

A corporation had the following assets and liabilities at the beginning and end of this year. Assets Liabilities Beginning of the year $ 57,000 $ 24,436 End of the year 115,000 46,575

a. Owner made no investments in the business, and no dividends were paid during the year.

b. Owner made no investments in the business, but dividends were $1,400 cash per month.

c. No dividends were paid during the year, but the owner did invest an additional $45,000 cash in exchange for common stock.

d. Dividends were $1,400 cash per month, and the owner invested an additional $35,000 cash in exchange for common stock.

Determine the net income earned or net loss incurred by the business during the year for each of the above separate cases.

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  1. 31 July, 17:21
    0
    Answer and Explanation:

    The computation of the net income earned or net loss incurred is shown below

    Particulars a b c d

    Equity beginning $32,564 $32,564 $32,564 $32,564

    balance

    Add:

    Owner investment $45,000 $35,000

    Less:

    Dividend $16,800 $16,800

    Add: Net income $35,861 $52,661

    or net loss ($9,139) $17,661

    Equity ending

    balance $68,425 $68,425 $68,425 $68,425

    Working notes

    The beginning and ending equity balance is

    Beginning equity balance is

    = Total assets beginning - total liabilities beginning

    = $57,000 - $24,436

    = $32,564

    Ending equity balance is

    = Total assets ending - total liabilities ending

    = $115,000 - $46,575

    = $68,425

    The annual year dividend is

    = $1,400 * 12 months

    = $16,800
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