Question

If beginning stockholder's equity was $65,000, ending stockholder's equity was $43,000, and dividends were $16,000, the amount of net income or net loss was_____________

Answer 1

To find the amount of net income or net loss, we adjust the ending stockholder's equity for dividends and the beginning stockholder's equity. After calculations, we find that the company has incurred a net loss of $6,000.

Step-by-step explanation:

To calculate the amount of net income or net loss, we need to look at the changes in the company's equity over the period. We are given the beginning stockholder's equity ($65,000), the ending stockholder's equity ($43,000), and the dividends paid out ($16,000). According to the basic accounting equation, ending equity is equal to beginning equity plus net income minus dividends. From this, we can calculate the net income or net loss.

We know that:

• 
  
• 
  

To solve for Net Income, we add dividends to both sides and then subtract beginning stockholder's equity from both sides:

• 
  
• 
  
• 
  

Therefore the company has incurred a net loss of $6,000.