Homework SourseBalance Sheets Net Income Financial information related to M
Balance Sheets, Net Income
Financial information related to Montana Interiors for October and November 20Y8 is as follows:
a. Prepare balance sheet for Montana Interiors as of October 31, 20Y8.
Prepare balance sheet for Montana Interiors as of November 30, 20Y8.
b. Determine the amount of net income for November, assuming that no additional capital stock was issued and no dividends were paid during the month.
$
c. Determine the amount of net income for November, assuming that no additional capital stock was issued but dividends of $20,000 were paid during the month.
$
| October 31, 20Y8 | November 30, 20Y8 | ||||
| Accounts payable | $ 40,000 | $ 65,000 | |||
| Accounts receivable | 75,000 | 118,000 | |||
| Capital stock | 60,000 | 60,000 | |||
| Retained earnings | ? | ? | |||
| Cash | 110,000 | 140,000 | |||
| Supplies | 15,000 | 20,000 |
Solution
a) Retained Earnings for October and November will be the balancing figure in the Balance sheet. The Balance Sheet of Montana Interiors for the month of october is shown as follows:-
Montana Interiors
Balance Sheet as on October 31, 20Y8 (Amount in $)
The Balance Sheet of Montana Interiors for the month of november is shown as follows:-
Montana Interiors
Balance Sheet as on November 31, 20Y8 (Amount in $)
b) The net income for the month of november will be equal to increase in retained earnings as no dividends were paid during the month of november.
Net income = Retained earnings at the end of November - Retained earnings at the end of October
Net Income for the month of november = $153,000-$100,000 = $53,000
c) Net Income after dividend paid = Closing Retained earnings - Opening retained earnings
= $153,000-$100,000 = $53,000
Net Income = Increase in Retained earnings + Dividend paid = $53,000+$20,000 = $73,000
| Assets | Amount |
| Accounts receivable | 75,000 |
| Cash | 110,000 |
| Supplies | 15,000 |
| Total Assets | 200,000 |
| Liabilities | Amount |
| Accounts payable | 40,000 |
| Stockholders\' Equity | |
| Capital Stock | 60,000 |
| Retained earnings (200,000-40,000-60,000) | 100,000 |
| Total liabilities and stockholders\' equity | 200,000 |
