Question

Archie corporation's trial balance included debits to expense accounts of $125,000, credits to revenue accounts of $175,000, and debits to the dividends account of $50,000. Based on this information, what is the company's net income (loss)?

Answer 1

Archie corporation's net income is $50,000, calculated by subtracting total expenses ($125,000) from total revenues ($175,000). Dividends do not affect the net income calculation.

Step-by-step explanation:

To calculate Archie corporation's net income (loss), we need to start by understanding that net income results from subtracting total expenses, including the cost of goods sold, operating expenses, tax expense, and interest expense from total revenues. In this case, the company has credits to revenue accounts of $175,000 and debits to expense accounts of $125,000.

Net income is calculated as:

• Total Revenues - Total Expenses = Net Income

Using the figures provided:

• $175,000 (Total Revenues) - $125,000 (Total Expenses) = $50,000 (Net Income)

It's important to note that dividends are not an expense but a distribution of profits to shareholders and do not affect the calculation of net income.

Therefore, based on the information given, the company's net income is $50,000.