Toth Company had the following assets and liabilities on the

Toth Company had the following assets and liabilities on the dates indicated. 2014 2015 2016 $495,075 $575,075 $705,075 $228,902 $278,902 $378,902 Toth began business on January 1, 2014, with an investment of $95,875 from stockholders. From an analysis of the change in stockholders\' equity during the year, compute the net income (or loss) for: (a) 2014, assuming Toth paid $17,615 in dividends for the year. Net income (loss) for 2014 (b) 2015, assuming stockholders made an additional investment of $47,942 and Toth paid no dividends in 2015. Net income (loss) for 2015 (c) 2016, assuming stockholders made an additional investment of $24,801 and Toth paid dividends of $27,097 in 2016. Net income (loss) for 2016 187913

Solution

Assets 575075

Less: Liabilities           278902

Less: Capital 314115 (266173+47942)

Plus:Dividend            0

Net LOSS: 17942

[Note:capital = opening capital+Additional capital

=266173+47942]

Opening capital=opening assets-opening liabilities=495075-228902=266173

Assets                           705075

Less: Liabilities           378902

Less:Capital 320974 (296173+24801)

Plus: Dividend           27097

Net income 32296

[Note: Capital=opening capital for year 2016+additional capital

=296173+24801

opening capital=opening assets-opening liabilities=575075-278902=296173

Note:Dividend is added in calculation of Net income because profit in the balance sheet is after deduction of dividend and for calculation of income in income statement we should add it back.]