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Homework answers / question archive / Information related to the Jones Company for the calendar year 2007 follows: Liabilities, December 31, 2007 $300 Assets, December 31, 2007 $700 Dividends Distributed during 2007 $90 Liabilities, December 31, 2006 $250 Assets, December 31, 2006 $500 Assuming no capital stock was issued during 2007, the net income earned by the Jones Company during 2007 was: a

Information related to the Jones Company for the calendar year 2007 follows: Liabilities, December 31, 2007 $300 Assets, December 31, 2007 $700 Dividends Distributed during 2007 $90 Liabilities, December 31, 2006 $250 Assets, December 31, 2006 $500 Assuming no capital stock was issued during 2007, the net income earned by the Jones Company during 2007 was: a

Accounting

Information related to the Jones Company for the calendar year 2007 follows:

Liabilities, December 31, 2007 $300
Assets, December 31, 2007 $700
Dividends Distributed during 2007 $90
Liabilities, December 31, 2006 $250
Assets, December 31, 2006 $500

Assuming no capital stock was issued during 2007, the net income earned by the Jones Company during 2007 was:

a. $60

b. $150

c. $240

d. $290

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Basic accounting equation is Assets = Liabilities + Equity

Therefore;

Equity, December 31, 2006 = Assets, December 31, 2006 - Liabilities, December 31, 2006

Equity, December 31, 2006 = $500 - $250

Equity, December 31, 2006 = $250

Equity, December 31, 2007 = Assets, December 31, 2007 - Liabilities, December 31, 2007

Equity, December 31, 2007 = $700 - $300

Equity, December 31, 2007 = $400

If there were no changes in capital stock during 2007 the only effect in equity would be the net income and dividends. Therefore, net income can be computed as follows:

Equity, December 31, 2007 $400
Less: Equity, December 31, 2006 250
Add: Dividends 90
Net Income, 2007 $240

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