Question

In: Accounting

The December 31, Year 4, balance sheet for Deen Company showed total stockholders’ equity of $156,000....

The December 31, Year 4, balance sheet for Deen Company showed total stockholders’ equity of $156,000. Total stockholders’ equity increased by $65,000 between December 31, Year 4, and December 31, Year 5. During Year 5, Deen Company acquired $20,000 cash from the issue of common stock. The Company paid a $5,000 cash dividend to the stockholders during Year 5.

Required

Determine the amount of net income or loss Deen reported on its Year 5 income statement. (Hint: Remember that stock issues, net income, and dividends all change total stockholders’ equity.)

Solutions

Expert Solution

Answer

Shareholder's Equity on 31 December, Year 5 = $156,000 + $65,000

= $221,000 (Shareholder's Equity increased by $65,000 between 31st December, year 4 and 31 December, Year 5)

Shareholder's Equity on December 31, Year 5 = Shareholder's Equity on December 31, Year 4 + Net Income - Dividends + Shares Issued

So,

Net Income = Shareholder's Equity on 31 December, Year 5 - Shareholder's Equity on 31 December, Year 4 + Dividends - Shares Issued

Now,

Net Income = $221,000 - $156,000 + $5,000 - $20,000

= $50,000

ekkarill92 answered 2 years ago
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