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20 August, 20:10

In year 1, Company A has the following info in its financial statements: Retained Earnings (beginning balance) of $32,000; Retained Earnings (ending balance) of $95,000; Revenue of $100,000, Expenses (including tax expense) of $30,000, and dividends declared $7,000.

What amount will be shown as Net Income in Income Statement?

a.$95,000

b.$70,000

c.$63,000

d.$77,000

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Answers (1)
  1. 20 August, 20:28
    0
    b.$70,000

    Explanation:

    The net income could be computed by two method

    First method is

    Net income = Revenue - expenses

    = $100,000 - $30,000

    = $70,000

    And, the second method is

    The ending balance of retained earning = Beginning balance of retained earnings + net income - dividend paid

    $95,000 = $32,000 + net income - $7,000

    So, the net income is $70,000
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