Hi,
So this is my first time trying this out, here it goes.

I am in an Accounting 101 class and half way through the first homework assignment, I inevitably was stumped.

Here's the question

Four different companies: M,N,O, and P show the same balance sheet data at the beginning and end of the year. These data, exclusive of the amount of owner's equity, are summarized as follows:

Beginning of the Year:
Total Assets = 750,000
Total Liabilities = 300,000

End of the Year:
Total Assets = 1,200,000
Total Liabilities = 650,000

On the basis of the above data and following info, determine the net income or loss of each company for the year.

Company M: No additional capital stock was issued, and no dividends were paid.
Company N: No additional capital stock was issued, but dividends of $60,000 were paid.
Company O: Capital stock of 150,000 was issued, but no dividends were paid.
Company P: Capital stock of 150,000 was issued, and dividends of 60,000 were paid.

I don't understand how I figure out net loss or gain from this info. I feel kind of dumb and I'm going to keep trying, but if anyone could give me some pointers it'd be most welcome! :)

-Katie
[email protected]

Keep this in mind,
Assets = Liabilities + Owner's Equity

Let's focus on Company M.

Beginning of the Year
750,000 = 300,000 + Equity (which must be 450,000)

End of Year:
1,200,000 = 650,000 + Equity (which must be 550,000)

Therefore, we know that Equity has increase by 100,000 during the year.

The calculation for Equity is as follows:

Beginning Equity
Plus Net Income
Less Dividends
Plus New Capital Stock Issued
The total represents Ending Equity

Since we know Company M did not issue any new stock or pay any dividends, the entire 100,000 increase must therefore be caused by net income.

Therefore, Company M had a Net Income of $100,000