[paterish]

How do you figure out net income?
Problem:
2012
Assets 34,000
Liabilities 21,500
2013
Assets 40,000
Liabilities 26,500
During year 2013
Stock Issuances 1,400
Net income (loss)?
Cash dividends 2,000

[ma0641]

Assuming all taxes etc are under liabilities, add up all liabilities and subtract from assets. 1400 what for stock? Cash dividends are paid to stockholders or income?

[rehmanvohra]

Increase in net assets: 13,500 - 12,500 = 1,000
Add dividends 2,000
Less Stock issuance 1,400
Net Income 1,600

[pready]

Start with what you have and what you need to find.

First your Owners Equity for 2012 is 2012 Assets minus 2012 Liabilities.

Next your Owners Equity for 2013 is 2013 Assets minus 2013 Liabilities.

Now you can solve for Net Income for 2013.

The formula that you need to know is: Ending Owners Equity = Beginning Equity + Stock Issuances + Net Income(Revenues - Expenses) - Cash Dividends = Ending Owners Equity

This formula can be rewritten as:
Net Income = Beginning Owners Equity(2012 Equity) - Ending Owners Equity(2013 Equity) - Stock Issuances + Cash Dividends