Accounting Chapter 1 Questions Shep Company’s records show the following information for the current year: Beginning of year End of year Total assets $ 54,400 $ 85,500 Total liabilities $ 24,200 $ 37,200 Determine net income (loss) for each of the following separate situations. (For all requirements, losses should be entered with a minus sign.) a. Additional common stock of $5,200 was issued, and dividends of $9,200 were paid during the current year. 22,100 b. Additional common stock of $15,550 was issued, and no dividends were paid during the current year. 2,550 c. No additional common stock was issued, and dividends of $14,200 were paid during the current year. 32,300 Explanation: We know that net income is part of equity, so is common stock and dividends Step 1 – Solve for beginning and ending equity knowing assets = liabilities + equity Beginning Ending Assets $ 54,400 $ 85,500 Liabilities (24,200) (37,200) Equity $ 30,200 $ 48,300 Beginning Equity = 30,200 Ending Equity = 48,300 calculated calculated (54,400 – 24,200) (85,500-37,200) Step 2 Let’s write out what affects Equity. Beginning Equity + NET INCOME + Common Stock - Dividends = Ending Equity. Let’s isolate net income: (algebra) - see below Net Income = Ending Equity – Beginning Equity – Common Stock + Dividends a b c = 48,300 = 48,300 = 48,300 – 30,200 – 5,200 -30,200 -15,550 -30,200 –0 +9,200 +0 + 14,200

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