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Q.2-15E

Expert-verified
Found in: Page 84

### Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

# Question: A corporation had the following assets and liabilities at the beginning and end of this year. Assets LiabilitiesBeginning of the year $60,000$20,000End of the year . . . . . . . . . . . . . . . . . 105,000 36,000Determine the net income earned or net loss incurred by the business during the year for each of the following separate cases:a. Owner made no investments in the business, and no dividends were paid during the year.b. Owner made no investments in the business, but dividends were $1,250 cash per month.c. No dividends were paid during the year, but the owner did invest an additional$55,000 cash in exchange for common stock.d. Dividends were $1,250 cash per month, and the owner invested an additional$35,000 cash in exchange for common stock.

The net income under different cases would be as follows:

Case a —$29,000 Case b —$14,000

Case c —$29,000 Case d —$14,000

See the step by step solution

## Step 4: Case c.

Explanation: - Additional investment would make zero net effect as both asset and equity would increase by additional investment.

## Step 4: Case d.

Explanation: - Additional investment would make zero net effect as both asset and equity would increase by additional investment.

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