The accounts of Odie Company with the increases or decreases that occurred during the past year are as follows: Account Increase Decrease Cash $25,000 Accounts receivable $(5,000) Accounts payable (11,000) Notes payable 16,000 Except for net income, an investment of $3,000 by the and a withdrawal of $11,000 by the owner, no other items affected owner's equity. Using the balance sheet equation, compute net income for the past year. Answer: $23,000 Explanation: Assets = Liabilities + Owner's Equity Assets Increased by $20,000; Liabilities Increased by $5,000; Therefore, Equity to Increase by $15,000. Change in Equity = Investment + Net Income Withdrawals — Increase of $15,000 = $3,000 + Net Income $11,000 — $15,000 = Net Income $8,000 — Net Income = $23,000 Diff: 3 Topic: Transaction Analysis; Financial Statements Learning Objective: 01-P1 Analyze business transactions the accounting equation.; 01-P2 Identify and prepare basic financial statements and explain how they interrelate. Bloom's: Apply AACSB: Analytic AICPA: BB Industry; FN Measurement
The accounts of Odie Company with the increases or decreases that occurred during the past year are as follows: Account Increase Decrease Cash Accounts receivable $25,000 $(5,000) Accounts payable Notes payable 16,000 (11,000) Except for net income, an investment of $3,000 by the and a withdrawal of $11,000 by the owner, no other items affected owner's equity. Using the balance sheet equation, compute net income for the past year. Answer: $23,000 Explanation: Assets = Liabilities + Owner's Equity Assets Increased by $20,000; Liabilities Increased by $5,000; Therefore, Equity to Increase by $15,000. Diff: 3 Change in Equity = Investment + Net Income — Withdrawals Increase of $15,000 = $3,000 + Net Income — $11,000 $15,000 = Net Income — $8,000 Net Income = $23,000 Topic: Transaction Analysis; Financial Statements Learning Objective: 01-P1 Analyze business transactions the accounting equation.; 01-P2 Identify and prepare basic financial statements and explain how they interrelate. Bloom's: Apply AACSB: Analytic AICPA: BB Industry; FN Measurement