Question

A company has beginning net assets of $100,000 and ending net assets of $95,000. During the year, additional capital stock was sold for $8,000, and dividends of $3,000 were declared. Using the capital maintenance approach, the net income (loss) for the year is calculated as

Answer 1

Net loss = $10,000

Step-by-step explanation:

The computation of net income (loss) is shown below:-

Change in net assets = beginning net assets - ending net assets

= $100,000 - $95,000

= $5,000

Net income(loss) = - Change in net assets - Capital stock sold + Dividends declared

= - $8,000 - $5,000 + $3,000

Net loss = $10,000

The financial capital maintenance requires income to determine the change in equity (assets). So here the details are not provided to reach income.