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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

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Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
BuyFindarrow_forward

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
Chapter 1, Problem 1.15EX
Textbook Problem
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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

To determine
The net income for the Company A.

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:

Net Income = Revenues - Expenses

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.

Stockholders’ Equity = {(Stockholders’invest

To determine
the net income for the Company B.

To determine
the net income for the Company C.

To determine
the net income for the Company D.

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Corporate Financial Accounting
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