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Net income and stockholders’ equity for four businesses Four different corporations, Amber, Blue, Coral, and Daffodil, show the same balance sheet data at the beginning and end of a year. These data, exclusive of the amount of stockholders’ equity, are summarized as follows: Total Assets Total Liabilities Beginning of the year $1,220,000 $ 990,000 End of the year 1,730,000 1,150,000 On the basis of the preceding data and the following additional information for the year, determine the net income (or loss) of each company for the year. ( Hint: First, determine the amount of increase or decrease in stockholders’ equity during the year.) Amber. No additional common stock was issued and no dividends were paid. Blue: No additional common stock was issued, but dividends of $60,000 were paid. Coral: Additional common stock of $140,000 was issued, but no dividends were paid. Daffodil: Additional common stock of $140,000 was issued and dividends of $60,000 were paid
Corporate Financial Accounting
Solutions
Corporate Financial Accounting
Net income and stockholders’ equity for four businesses
Four different corporations, Amber, Blue, Coral, and Daffodil, show the same balance sheet data at the beginning and end of a year. These data, exclusive of the amount of stockholders’ equity, are summarized as follows:
| Total Assets | Total Liabilities | |
| Beginning of the year | $1,220,000 |
$ 990,000 |
| End of the year | 1,730,000 | 1,150,000 |
On the basis of the preceding data and the following additional information for the year, determine the net income (or loss) of each company for the year. (Hint: First, determine the amount of increase or decrease in stockholders’ equity during the year.)
Amber. No additional common stock was issued and no dividends were paid.
Blue: No additional common stock was issued, but dividends of $60,000 were paid.
Coral: Additional common stock of $140,000 was issued, but no dividends were paid.
Daffodil: Additional common stock of $140,000 was issued and dividends of $60,000 were paid
Explanation of Solution
Net income: The net income refers to the excess of revenues over expenses, in a business after making all the adjustments. The net income can be expressed as follows:
Stockholders’ Equity: Stockholders’ equity is the owners’ claim on the assets of the organization. Examples: Subscribed capital, Retained earnings, and Treasury shares.
Revenues and the expenses are the components of the stockholders’ equity.
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