Question

(a) If operations for an accounting period resulted in cash sales of $25,000, sales on account of $30,000, and expenses paid in cash of $50,000, did the business incur a net income or a net loss for the period? (b) What is the amount of net income or net loss? (c) If liabilities are $65,000 and owner’s equity is $35,000, the amount of the assets is: (d) If assets are $205,000 and owner’s equity is $75,000, the amount of the liabilities is:

Answer 1

a.
	Net Income
b.	Amount of Net Income			$ 5,000
Working:
	Cash sales			$       25,000
	Sales on account			$       30,000
	Total Sales		A	$       55,000
	Expenses		B	$       50,000
	Net Income		A-B	$         5,000
c.
	Amount of assets			$   1,00,000
	Working:
	As per Balance sheet Equation,
	Assets	=	Liabilities + Owner's Equity
		=	$           65,000	+	$       35,000
		=	$       1,00,000
d.
	Liabilities		$ 1,30,000
Working:
	Liabilities	=	Assets - Owner's Euity
		=	$       2,05,000	-	$       75,000
		=	$       1,30,000