Question

Given the following information, determine net income. The capital balance on January 1, 2016, equals $25,000; investments and withdrawals during 2016 total $53,000 and $28,350, respectively; and the capital balance at December 31, 2016, equals $64,850.

a. $15,200
b. $41,500
c. $43,550
d. None of these choices are correct

Answer 1

a. $15,200

Step-by-step explanation:

As we know that

Ending year capital balance = Beginning year capital balance + net income + investment made during the year - withdrawn during the year

$64,850 = $25,000 + net income + $53,000 - $28,350

$64,850 = $49,650 + net income

So, the net income would be

= $64,850 - $49,650

= $15,200

We simply added the beginning year balance, net income, investment and deduct the withdrawn amount to find out the closing year balance.