Question

A company has been in business for five years. As of December 31, 2008, the company had assets of $475,000 and liabilities of $200,000. After a successful year of business in 2009, the company's assets had increased by $95,000, and liabilities had increased by $40,000. While no new investments were made into the company during 2009, a dividend of $12,000 was paid to owners. Based on this information, determine the company's net income for the year 2009.

Answer 1

Answer:

$67,000

Explanation:

Data provided in the question:

Value of assets on December 31, 2008 = $475,000

Liabilities on December 31, 2008 = $200,000

Increase in assets in 2009 = $95,000

Increase in liabilities in  2009 = $40,000

Dividend paid = $12,000

Now,

The company's net income for the year 2009

= Increase in assets in 2009 + Dividend paid - Increase in liabilities

= $95,000 +  $12,000 - $40,000

= $67,000