[cocomonet90]

Great city builders balance sheet data att may 31, 2012 follow,

1. following the owner invested $6,000 in the business and made no withdrawals
a. the owner invested $6,000 in the business and made no withdraws.
b. the owner made no investments of $18,000 and withdrew cash $10,000
c. the company owner made investments of $18,000 and withdrew cash of $20,000 I need help


Data table; May 31,2012 , June 30, 2012

Total assets: $177,000 , $213,000

Total liabilities $122,000 , $144,000

[paraclete]

None of the above

[emadwari]

It seems a bit too late to answer this :).

You Would need first to complete the accounting equation by getting the equity for each period.

The Accounting equation is (Assets = Liabilities + Equity )
So we need to to get the equity value
* Equity = assets - Liabilities

So lets start with the solutions:

1. Month Started Balance - May 31, 2012: Assets (177,000) = Liabilities (122,000) + Equity (Assets-Liabilities)
Equity = Assets (177,000) - Liabilities ( 122,000) = 55,000

2. Month Ended Balance - June 30,2012: Assets (213,000) = Liabilities (144) + Equity (Assets-Liabilities)
Equity = Assets (213,000) - Liabilities (144,000) = 69,000

Now – as the question stated, we need to take A and B and C scenarios as the only thing that changed, which will affect the Assets + equity, because the scenario is Adding Common stock or paying dividends, therefore the only matter to the solution now is the Equity.

Lets get the difference in equity from the start and end period.

3. End Equity (69,000) (–) Start Equity (55,000) (=) $14,000 Extra Equity we had during the one month period from May 31, 2012 to June 30, 2012.

The question requires us to get the Net Income for the specified period .

14,000 is the total change in equity, now apply the Situations and figure out the net income for each.

a. The company issued $6,000 of common stock and paid no dividends.
So the $14,000 Equity Includes a $6,000 common stock added to it
Lets subtracts the Common stock from the total difference in equity
14,000 – 6,000 = 8,000
Net Income = $8,000

b. The company issued no common stock, It paid cash dividends of $10,000.
So the $14,000 is the total after paying $10,000 Dividends,
Lets add the paid dividends to the total difference in equity
14,000 + 10,000 = 24,000
Net income = $24,000

c. The company issued $18,000 of common stock and paid cash dividends of $20,000.
So the $14,000 is the total after adding $18,000 common stock and after paying the $20,000 dividends.
Lets reverse the transaction by returning the common stock and getting back what been paid as dividends .
14,000 – 18,000 + 20,000 = 16,000
Net Income = 16,000

Remember – the provided balance sheet results will always remain the same, the only changes would be inside the balance sheet in the numbers. Total will remain the same.

Emad M. Alwari

[ma0641]

You do realize the question was asked 3 years ago. Please look at the posting date.

[emadwari]

Yes I do realize ma0641, this is how I started the answer stating it's a bit late. But other people will get to ask the same question again because the question is repeated in the business books, So hopefully my answer would help some one who may need in future. Beside, why answering is bad for you? Even after 3 years? Emad