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    b12027159's Avatar
    b12027159 Posts: 1, Reputation: 1
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    #1

    Feb 11, 2013, 04:15 PM
    How would I calculate net income for this problem?
    How do I find the net income for year 2011?

    December 31, 2010
    Assets 35,000
    Liabilities 22,500

    December 31, 2011
    Assets 41,000
    Liabilities 27,500

    During year 2011
    Stock issuances 1,500
    Net income ?
    Cash dividends 3,000
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    #2

    Feb 11, 2013, 06:26 PM
    First you need to calculate Owners Equity for 2010 and 2011.

    This is part of the accounting equation, which is: Assets = Liabilities + Owners Equity, which can be rewritten as: Owners Equity = Assets - Liabilities.

    Now that you know the 2 amounts of Owners equity you have to account for the change from the 2010 to the 2011 amount.

    So you take your 2011 Owners Equity and subtract your 2010 Onwers Equity, then subtract your stock issuances and add back in your cash dividends to get your answer.
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