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A tabular analysis of the transactions made during August 2017 by Ivanhoe Company during its first month of operations is shown below
A tabular analysis of the transactions made during August 2017 by Ivanhoe Company during its first month of operations is shown below. Each increase and decrease in stockholders' equity is explained.
Assets= Liabilities+ Stockholders' EquityCash+ A/R+ Supp.+ Equip.= Accounts Payable+ Common Stock+ Retained EarningsRevenues- Expenses- Dividends(1)
$23,100$23,100Com. Stock
(2)
-1,590$5,090$3,500(3)
-860$860(4)
5,100$5,500$10,600Serv. Rev.
(5)
-1,700-1,700(6)
-2,200-$2,200Div.
(7)
-740-$740Rent Exp.
(8)
370-370(9)
-3,300-3,300Sal. Exp.
(10)
380-380Util. Exp.
Expert Solution
a) Computation of Net Income:
Revenue = $10,600
Expenses = $740 + $3,300 + $380
Expenses = $4,420
Dividends = $2,200
Net Income = Revenue - Expenses
Net Income = $10,600 - $4,420
Net Income = $6,180
b) Computation of Increase in Stockholders' Equity:
Increase in Stockholders' Equity = Common Stock + Net Income - Dividend
Increase in Stockholders' Equity = $23,100 + $6,180 - $2,200
Increase in Stockholders' Equity = $27,080
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