Question

Company is in the second year of operations. They have total assets of $200,000 at the end of the first year. During the first year, the company incurs liabilities of $75,000 and stockholders invested $80,000 in the form of Paid in Capital. On the assumption no dividends were declared in the first year of operations, what is the amount of net income?

Answer 1

The amount of net income is $45,000

Step-by-step explanation:

The computation of the net income is shown below:

= Total assets - Liabilities - stockholder equity

= $200,000 - $75,000 - $80,000

= $45,0000

By using the accounting equation, the total assets equal to the total liabilities and stockholder equity

In mathematically,

Total assets = Total liabilities + stockholder equity

But in the given question, the amounts are not equal to each other, so the difference should be termed as net income