Question

Presented below are changes in all account balances of ABC inc. during the current year, except for retained earnings. Increase (Decrease) Cash 20,000 Accounts Receivable (net) (31,000) Inventory 65,000 Investments 19,000 Accounts Payable 30,000 Bonds Payable (23,000) Common Stock 7,000 Paid-In Capital in Excess of Par-Common Stock 48,000 Assume there were no entries in the Retained Earnings except for net income and a dividend declaration of $1,000 which was paid in the current year. What did ABC report for net income during the current year

Answer 1

Net income $12,000

Step-by-step explanation:

The computation of the amount of net income reported is shown below:

Increase in cash $20,000

Less: Increase in Accounts Payable -$30,000

Less: Decrease in Accounts Receivable -$31,000

Add: Decrease in Bonds Payable $23,000

Add: Increase in inventory $65,000

Less: Increase in common stock -$7,000

Add: Increase in investments $19,000

Less: Increase in paid-in capital -$48,000

Add: dividend declared $1,000

Net income $12,000