Question

The accounting records of Nettle Distribution show the following assets and liabilities as of December 31, 2016 and 2017.

December 31 2016 2017
Cash $64,300 15,640
Accounts receivable 26,240 19,100
Office supplies 3160 1960
Office equipment 44,000 44,000
Trucks 148,000 157,000
Building 0 80,000
Land 0 60,000
Accounts payable 3,500 33,500
Note payable 0 40,000

Required:
Compute net income for 2017 by comparing total equity amounts for these two years and using the following information: During 2017, the owner invested $35,000 additional cash in the business (in exchange for common stock) and the company paid $19,000 cash in dividends.

Answer 1

Step-by-step explanation:

To calculate equity

Total assets

2016 2017

Cash 64,300 15,640

Accounts receivable 26,240 19,100

Office supplies 3,160 1,960

Office equipment 44,000 44,000

Trucks 148,000 157,000

Building 80,000

Land 60,000

Total 285,700 377,700

Total liabilities

Accounts payable 3,500 33,500

Notes payable 40,000

Total 3,500 73,500

Total equity = Total assets = Total liabilities

2016 = ( 285700-3500)= 282,200

2017 = (377,700 - 73,500) 304,200

Net income for 2017

Total equity = 304,200

Less additional cash invested (35,000)

Add back dividends paid 19,000

288,200

Less total equity for 2016 (282,200)

6,000