December 31, 2012

















Assets
$
55,000

$
34,000

$
24,000

$
60,000

$
119,000



Liabilities

24,500


21,500


9,000


40,000


?



December 31, 2013

















Assets

58,000


40,000


?


85,000


113,000



Liabilities

?


26,500


29,000


24,000


70,000



During year 2013

















Stock issuances

6,000


1,400


9,750


?


6,500



Net income (loss)

8,500


?


8,000


14,000


20,000



Cash dividends

3,500


2,000


5,875


0


11,000







How do I find net income in the second column of this sheet?

For this type of problem you need to know 2 formulas; 1: basic accounting equation, and 2: changes in equity.

The basic accounting equation is:
Assets = Liabilities + Owners Equity which can be rewritten two additional ways to find a missing amount. The other ways it can be written are:
Liabilities = Assets - Owners Equity
Owners Equity = Assets - Liabilities

Now for changes in Equity the expanded formula is:
Ending Owners Equity = Beginning Owners Equity + Stock Issuances(additional investments) + Net Income(Revenues - Expenses) - Cash dividends(or drawings)

For Net Income the formula can be rewritten as:
Net Income = Ending Owners Equity - Beginning Owners Equity - Stock Issuances + Cash Dividends

For Stock Issuances the formula can be rewritten as:
Stock Issuances = Ending Owners Equity - Beginning Owners Equity - Net Income + Cash Dividends

To Find assets use the beginning owners equity and solve for the ending equity, then add your ending owners equity and ending liabilities.