Question

The following information appeared in the financial records of the Cracker Corporation at year-end:

Accounts receivable	$ 23,000
Accounts payable	11,000
Supplies	9,000
Cash	8,000
Equipment	138,000
Capital stock	130,000

If the beginning of year balance in retained earnings is $30,000 and $12,000 in dividends are paid during the year, net income for the year was:

$18,000

$57,000

$19,000

$39,000

Answer 1

	CALCULATION OF TOAL ASSETS AND TOTAL LIABILITIES + CAPITAL STOCK
	Assets	AMOUNT
	Cash	$                    8,000
	Account Receivable	$                  23,000
	Supplies	$                    9,000
	Equipment	$              1,38,000
	Total Assets	$              1,78,000
	Total Liabilities
	Account Payable	$                  11,000
	Capital Stock	$              1,30,000
	Total of Liability and Capital Stock	$              1,41,000
	CALCULATION OF THE CLOSING RETAINED EARNINGS
	Closing Retained Earning = Total Assets -Total Liabilities and Capital Stock
	Closing Retained Earning = $ 178,000 - $ 141,000 =	$                  37,000
	Net Income = Clsoing Retained Earning + Dividend Paid - Opening Retained Earning
	Net Income = ( $ 37,000 + $ 12,000 ) - $ $ 30,000
	Net Income = $ 49,000 - $ $ 30,000
	Net Income = $ 19,000
	Answer = Option 3 = $ 19,000