Question

A company's assets are in May are $188,000 and June $244,000 and the liabilities are $122,000 in May and $88,000 in June.

For each of the following situations with regard to common stock and dividends of a corporation, compute the amount of net income or net loss during June 2016.


a)The company issued $7,500 of common stock and paid no dividends.

$148,500


b)The company issued no common stock. It paid cash dividends of $13,000.

$143,000



c)The company issued $20,000 of common stock and paid cash dividends of $18,000.

$118,000

Answer 1

a. $82,500

b. $103,000

c. $88,000

Step-by-step explanation:

We know that

Total assets = Total liabilities + stockholder equity

And the assets and liabilities of May and June are given

So For May

The stockholder equity would be

= $188,000 - $122,000

= $66,000

And for June

The stockholder equity would be

= $244,000 - $88,000

= $156,000

So net increase would be

= $156,000 - $66,000

= $90,000

a. The stock is issued for $7,500

So, the net income would be

= $90,000 - $7,500

= $82,500

b. The cash dividend is paid for $13,000

So, the net income would be

= $90,000 + $13,000

= $103,000

c. Common stock is issued for $20,000 and cash dividend is paid for $18,000

So, the net income would be

= $90,000 - $20,000 + $18,000

= $88,000