Question

Maxwell Flooring started the year with total assets of $160,000 and total liabilities of $75,000. During the year, the business recorded $250,000 in revenues, $100,000 in expenses, and dividends of $30,000. The net income reported by Maxwell Flooring for the year was A : $150,000. B : $85,000. C : $125,000. D : $90,000.

Answer 1

(A) $150,000

Step-by-step explanation:

As per the given data of the question,

Maxwell Flooring started the year with

Total Assets = $160,000

Total liabilities = $75,000

Revenues = $250,000

Expenses = $100,000

Dividends = $30,000

Stockholders' equity at the end of the year was given by formula:

SE = (Total Assets - Total Liabilities) + (Revenues - Expenses) - Dividends

Therefore,

SE = (Total Assets - Total Liabilities) + (Revenues - Expenses) - Dividends

SE = ($160,000 - $75,000) + ($250,000 - $100,000) - $30,000

SE = $205000

Now,

Stockholders' equity at the end of the year

= Net income - Dividend + Assets - Liabilities

$205000 = Net income - $30,000 + $160,000- $75,000

∴ Net income = $205,000 - $55000 = $150,000

Hence,The net income reported by Maxwell Flooring for the year = $150,000