Iverson Company had the following assets and liabilities on the dates indicated.




December 31



Total Assets



Total Liabilities



2013

$475,533

$223,471


2014

$535,533

$273,471


2015

$665,533

$373,471



Iverson began business on January 1, 2013, with an investment of $97,117.

From an analysis of the change in owner’s equity during the year, compute the net income (or loss) for:

(a) 2013, assuming Iverson’s drawings were $19,739 for the year.



Net income for 2013

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(b) 2014, assuming Iverson made an additional investment of $44,409 and had no drawings in 2014.



Net loss for 2014

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(c) 2015, assuming Iverson made an additional investment of $18,220 and had drawings of $17,811 in 2015.



Net income for 2015

$http://edugen.wiley.com/edugen/art2/common/pixel.gif

Show us your work, we don't do homework.

I just need instructions on how to figure it out.

Ok. What is the most basic accounting equation? Assets =...

Next, think about how owner investments and draws affect equity. Then think about how net income or loss affects equity. I know I'm a bit rusty but by my calculations, the company had a net income of roughly $174,000 in 2013. What did you come up with?

it is all contained in the equation assets - liabilities equals equity. By introducing the various numbers into the equation at the appropriate point and comparing it with the opening figures what remains must be your answer

You need to know the changes is equity formula, which is:
Beginning Owners Equity + Owners Investments - Owners Drawings + Net Income (Revenues - Expenses) = Ending Owners Equity

So if you have all the above information except for one item then you can rearrange the formula to solve for the missing item.

For example you are trying to solve for Net Income you would rearrange the formula to:
Net Income = Ending Owners Equity - Beginning Owners Equity - Owners Investments + Owners Drawings


Note: In these types of problems you might have to solve for Beginning Owners Equity or Ending Owners Equity first by using the basic accounting equation and rearranging it to solve for either Beginning or Ending Owners Equity.