Question

Calculation of net income from the change in stockholders' equity.
Presented below are changes in the account balances of Wenn Company during the year, except for retained earnings.

	Increase	Increase
	(Decrease)	(Decrease)

Cash

$29,000

Accounts payable

$34,000

Accounts receivable (net)

(18,000)

Bonds payable

(20,000)

Inventory	52,000		Common stock	62,000
Plant assets (net)	57,000		Paid-in capital	16,000

The only entries in Retained Earnings were for net income and a dividend declaration of $17,000.

1. Compute the net income for the current year. Show your work and clearly mark you answer.

Answer 1

Net income for the current year = $45,000

Change in Assets [ 29,000 + 52,000 + 57,000 – 18,000 ]	120,000
Change in Liabilities [ 34,000 – 20,000 ]	14,000
Change in Stockholders Equity [ 120,000 – 14,000 ]		106,000
Change in stockholders Equity, Net increase		106,000
Add : Increase in Common Stock	62,000
Add : Increase in additional paid in capital	16,000
Less : Dividend Declared	(17,000)
Net increase		61,000
Net Income for the current year [ $106,000 – 61,000 ]		$45,000