Question

Presented below are changes in selected account balances of Heys Inc. during 2019, except for retained earnings.

                                                         Increase                                                                   Increase

                                                         (Decrease)                                                                (Decrease)

Cash..................................................... $22,000           Accounts payable............................ $28,000

Accounts receivable (net)......................... (9,000)           Bonds payable................................ (14,000)

Inventory................................................. 48,000           Common shares................................ 72,000

Plant Assets (net)..................................... 24,000

The only entries in retained earnings were for net income and a dividend declaration of $12,000.

Instructions (show all calculation)

Calculate the net income for 2019.

(Hint: Consider change in Accounting Equation [A – L = SHE]; separate the SHE components Common Stock & Retained Earnings to compute the Net Income)

Answer 1

Change in Assets:
cash	22,000
Accounts receivable	-9,000
Inventory	48,000
Plant Assets	24,000
Total Change in Assets		85,000
Change in Liabilities:
Accounts payable	28,000
Bonds payable	-14,000
Total Change in Liabilities		14,000
Change in Stockholders' Equity		71,000
less:
Increase in common stock		72,000
Add: Dividends declared		12,000
Net income		13,000