Question

Alpha Corporation is a service company. Alpha has the following balances at the start of January 2020: • Accounts Receivable $ 6,000 • Accounts Payable $ 4,000 • Cash $ 8000 • Land $ 20,000 Alpha has the following balances at the start of January 2021: • Accounts Receivable increased by 50% • Accounts Payable decreased by 50% • Cash increased by 25% • Additional Land was purchased for $10,000. During 2020: New Shares issued = $10,000 Dividends = $5,000 Required: Calculate Net Income for the year ending 2020.

Answer 1

To calculate the net income for the year ending 2020, we need to consider the changes in assets and the financial activities of Alpha Corporation. The net income for the year ending 2020 is $46,000.

Step-by-step explanation:

To calculate the net income for the year ending 2020, we need to consider the changes in assets and the financial

activities of Alpha Corporation.

First, let's calculate the change in accounts receivable:

Accounts Receivable at the start of January 2020 = $6,000

Accounts Receivable increased by 50%, so the change is 50% of $6,000 = $3,000

New Accounts Receivable at the start of January 2021 = $6,000 + $3,000 = $9,000

Next, let's calculate the change in accounts payable:

Accounts Payable at the start of January 2020 = $4,000

Accounts Payable decreased by 50%, so the change is -50% of $4,000 = -$2,000

New Accounts Payable at the start of January 2021 = $4,000 - $2,000 = $2,000

Now, let's calculate the change in cash:

Cash at the start of January 2020 = $8,000

Cash increased by 25%, so the change is 25% of $8,000 = $2,000

New Cash at the start of January 2021 = $8,000 + $2,000 = $10,000

Lastly, let's calculate the change in land:

Additional Land purchased for $10,000

New Land at the start of January 2021 = $20,000 + $10,000 = $30,000

Now, let's calculate Net Income:

Net Income = (New Assets - Old Assets) - Dividends

Net Income = ($9,000 + $2,000 + $10,000 + $30,000) - $5,000 = $46,000