Acct 220 As Of The End Of Its Accounting Period, December 31

Acct 220 As of the end of its accounting period, December 31, Year 1, Great Plains Company has assets of $950,000 and liabilities of $330,000. During Year 2, stockholders invested an additional $65,000 and received $30,000 in dividends from the business. What is the amount of net income during Year 2, assuming that as of December 31, Year 2, assets were $965,000 and liabilities were $290,000?

Great Plains Company started Year 1 with assets of $950,000 and liabilities of $330,000. To determine the net income for Year 2, we analyze the change in stockholders' equity over that period, accounting for additional investments and dividends paid, along with the end-of-year asset and liability balances.

Initial equity at the end of Year 1 can be calculated as:

  • Equity at Year 1 end = Assets - Liabilities = $950,000 - $330,000 = $620,000

Changes during Year 2 include:

  • Additional stockholders’ investments: $65,000
  • Dividends paid: $30,000

The equity at the end of Year 2 was:

  • Equity at Year 2 end = Assets - Liabilities = $965,000 - $290,000 = $675,000

Using the accounting equation, the change in stockholders' equity is:

Change in Equity = Ending Equity - Beginning Equity = $675,000 - $620,000 = $55,000

Applying the formula for net income:

Net Income = Change in Equity - Additional Investments + Dividends Paid

Net Income = $55,000 - $65,000 + $30,000 = $20,000

Answer: The net income during Year 2 is $20,000.

Sample Paper For Above instruction

The calculation of net income in a company's financial statements is essential for understanding its profitability over a specified period. In this case, assessing Great Plains Company's net income for Year 2 involves examining changes in assets, liabilities, and stockholders' equity, considering additional investments and dividends paid throughout the year.

At the start of Year 2, the company's assets stood at $950,000, with liabilities of $330,000, resulting in an equity of $620,000. During the year, stockholders invested an additional $65,000 and received $30,000 in dividends, both of which impact the company's retained earnings and overall equity. By the end of Year 2, the company's assets increased marginally to $965,000, while liabilities decreased to $290,000, leading to an ending equity of $675,000.

To determine the net income for Year 2, it is necessary to analyze the change in equity that occurred during the year. The formula for change in equity considers the opening and closing balances, adjusted for new investments and dividends. The calculation yields a net income of $20,000, indicating the company's profitability after accounting for all financial activities in the year.

This approach aligns with accounting principles that focus on the relationship between assets, liabilities, and equity. It demonstrates how net income is reflected in the increase in stockholders' equity, adjusted for external transactions such as additional investments and dividend distributions. Understanding these components provides a comprehensive view of the company’s financial performance.

In conclusion, analyzing the company's financial data shows that despite investments and dividend payouts, the company achieved a net income of $20,000 for Year 2. Accurate and transparent financial reporting enables stakeholders to make informed decisions based on the company's profitability and financial stability.

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