Question

Novak Corp. began the year with retained earnings of $124000. During 2022, the company issued $80000 of common stock for cash. The company recorded revenues of $728000, expenses of $637000, and paid dividends of $35000. What was Novak's net income for the year 2022

Answer 1

$91,000

Step-by-step explanation:

net income = total revenues - total expenses = $728,000 - $637,000 = $91,000

The retained earnings account holds the accumulated income and dividends distributed of the previous years, but not for the current year. Dividends are only distributed from retained earnings, and they do not affect the company's income or taxes.

New stocks issued increase stockholders' equity but don't affect income either.

Answer 2

$100,000

Step-by-step explanation:

Novak's net income for the year will be = Total Revenue generated - Total expenses incurred

For the year 22000;

Revenue generated:

Retained earning = $124,000

Company recorded revenues for year 22000= $728,000

Total Revenue = $124,000+$728,000

Total revenue = $852,000

Expenses incurred:

Common stock for cash issued = $80,000

Expenses = $637,000

Paid dividend = $35,000

Total expenses incurred = $80,000+$637,000+$35,000

= $752,000

Net income = $852,000 - $752,009

Net income = $100,000

Novak's net income for the year 2022 is $100,000