Questions: Compute the net income of the year for Company B. Equity, beginning of year 7,488 Add: Stock issuances 1,400 ? 8,888 Less: Cash dividends 2,000 Equity, end of year

Compute the net income of the year for Company B. Equity, beginning of year 7,488 Add: Stock issuances 1,400 ? 8,888 Less: Cash dividends 2,000 Equity, end of year
Transcript text: Compute the net income of the year for Company B. \begin{tabular}{|c|c|c|} \hline Equity, beginning of year & \$ & 7,488 \\ \hline Add: Stock issuances & & 1,400 \\ \hline ? & & \\ \hline & & 8,888 \\ \hline Less: Cash dividends & & 2,000 \\ \hline Equity, end of year & & \\ \hline \end{tabular}
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Solution

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To compute the net income of the year for Company B, we need to use the information provided in the table and apply the basic accounting equation for equity changes:

\[ \text{Equity, end of year} = \text{Equity, beginning of year} + \text{Stock issuances} + \text{Net income} - \text{Cash dividends} \]

Given data:

  • Equity, beginning of year: \$7,488
  • Stock issuances: \$1,400
  • Cash dividends: \$2,000

We also know that the equity at the end of the year is \$8,888. We need to find the net income for the year.

First, let's set up the equation with the known values:

\[ 8,888 = 7,488 + 1,400 + \text{Net income} - 2,000 \]

Now, solve for the net income:

\[ 8,888 = 7,488 + 1,400 + \text{Net income} - 2,000 \] \[ 8,888 = 6,888 + \text{Net income} \] \[ \text{Net income} = 8,888 - 6,888 \] \[ \text{Net income} = 2,000 \]

Therefore, the net income of the year for Company B is \$2,000.

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