Net Income = Ending RE + Dividends - Beginning RE
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required information
E1-4 (Algo) Completing a Balance Sheet and Inferring Net Income [LO 1-2, LO 1-3]
[The following information applies to the questions displayed below.]
Ken Young and Kim Sherwood organized Reader Direct as a corporation; each contributed $54,000 cash to start the
business and received 4,000 shares of stock. The store completed its first year of operations on December 31, 2020. On
that date, the following financial items for the year were determined: cash on hand and in the bank, $49,500; amounts due
from customers from sales of books, $28,400; equipment, $53,000; amounts owed to publishers for books purchased,
$8,900; one-year notes payable to a local bank for $5,100. No dividends were declared or paid to the stockholders during
the year.
E1-4 (Algo) Part 2
2. Using the retained earnings equation and an opening balance of $0, work backwards to compute the amount of net income for the
year ended December 31, 2020.
Net Income = Ending RE + Dividends - Beginning RE](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F237712da-dd92-4cff-a93e-8b9421fe386d%2F8a61cb3b-dad9-4bef-adbe-cc4ba836dae8%2Fobmcea_processed.jpeg&w=3840&q=75)
Transcribed Image Text:!
Required information
E1-4 (Algo) Completing a Balance Sheet and Inferring Net Income [LO 1-2, LO 1-3]
[The following information applies to the questions displayed below.]
Ken Young and Kim Sherwood organized Reader Direct as a corporation; each contributed $54,000 cash to start the
business and received 4,000 shares of stock. The store completed its first year of operations on December 31, 2020. On
that date, the following financial items for the year were determined: cash on hand and in the bank, $49,500; amounts due
from customers from sales of books, $28,400; equipment, $53,000; amounts owed to publishers for books purchased,
$8,900; one-year notes payable to a local bank for $5,100. No dividends were declared or paid to the stockholders during
the year.
E1-4 (Algo) Part 2
2. Using the retained earnings equation and an opening balance of $0, work backwards to compute the amount of net income for the
year ended December 31, 2020.
Net Income = Ending RE + Dividends - Beginning RE
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