Chapter 1, Problem 18AE

Using the accounting equation to determine net income (Learning Objectives 5 & 6) 15-20 min.

The balance sheet data for Angel’s Countertops, Inc., at August 31, 2018, and September 30, 2018, follow:

	Aug 31, 2016	Sep 30, 2018
Total Assets.................................................	$105,000	$180,000
Total Liabilities.............................................	75,000	129,000
Common Stock............................................	10,000	10,000
Total Stockholders’ Equity...........................	?	?

Requirement

The following are three independent assumptions about the business during September. For each assumption, compute the amount of net income or net loss during September 2018. Find the solution by preparing the statement of retained earnings. First, use the amounts of total assets, total liabilities, and common stock given previously and the accounting equation to determine the beginning and ending retained earnings amounts. Then, plug those and the other amount given in each assumption Into the statement of retained earnings to determine the net income or net loss.

1. a. The business paid no dividends.
2. b. The business paid $10,000 of dividends
3. c. The business paid $16,000 of dividends.