Question

Exercise 104

Presented below are changes in the account balances of Wenn Company during the year, except for retained earnings.

		Increase (Decrease)						Increase (Decrease)
Cash			$28,540			Accounts payable			$35,860
Accounts receivable (net)			(17,130)			Bonds payable			(22,600)
Inventory			51,060			Common stock			63,010
Plant assets (net)			46,890			Paid-in capital			16,480

The only entries in Retained Earnings were for net income and a dividend declaration of $17,030.

(a)

Compute the net income for the current year.

Answer 1

Increase in Assets = Increase in Cash - Decrease in Accounts Receivable + Increase in Inventory + Increase in Plant Assets
Increase in Assets = $28,540 - $17,130 + $51,060 + $46,890
Increase in Assets = $109,360

Increase in Liabilities = Increase in Accounts Payable - Decrease in Bonds Payable
Increase in Liabilities = $35,860 - $22,600
Increase in Liabilities = $13,260

Increase in Assets = Increase in Liabilities + Increase in Equity
$109,360 = $13,260 + Increase in Equity
Increase in Equity = $96,100

Increase in Equity = Increase in Common Stock + Increase in Paid-in Capital + Increase in Retained Earnings
$96,100 = $63,010 + $16,480 + Increase in Retained Earnings
Increase in Retained Earnings = $16,610

Increase in Retained Earnings = Net Income - Dividend Paid
$16,610 = Net Income - $17,030
Net Income = $33,640