Ask Question
22 July, 16:02

Abbie Marson is the sole owner and operator of Great Plains Company. As of the end of its accounting period, December 31, Year 1, Great Plains Company has assets of $910,049 and liabilities of $274,794. During Year 2, Marson invested an additional $28,651 and withdrew $25,020 from the business. What is the amount of net income during Year 2, assuming that as of December 31, Year 2, assets were $988,160 and liabilities were $234,792?

+1
Answers (1)
  1. 22 July, 17:39
    0
    The net income for Year 2 is $ 114,482

    Explanation:

    Accounting Equation is used in order to calculate the closing capital figure of Year 1 and Year 2:

    Assets=Liabilities + Equity.

    we can rearrange the formula as Assets-Liabilities = Equity

    So in Year 1. the closing capital is: $910,049-$274,794 = $635,255. In Year 2. the closing capital is : $988,160-$234,792 = $ 753,368

    Now we can construct an equation to drive net income of year to by means of balancing figure:

    Opening capital year 1: $635,255

    + Additional Capital in Year 2: $28,651

    -Drawing in year 2: $ (25,020)

    Net Income (Balancing figure) $114,482

    Closing Capital Year 2: $ 753,368
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Abbie Marson is the sole owner and operator of Great Plains Company. As of the end of its accounting period, December 31, Year 1, Great ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers