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30 July, 02:24

A company has beginning net assets of $100,000 and ending net assets of $95,000. During the year, additional capital stock was sold for $8,000, and dividends of $3,000 were declared. Using the capital maintenance approach, the net income (loss) for the year is calculated as

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  1. 30 July, 05:29
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    Net loss = $10,000

    Explanation:

    The computation of net income (loss) is shown below:-

    Change in net assets = beginning net assets - ending net assets

    = $100,000 - $95,000

    = $5,000

    Net income (loss) = - Change in net assets - Capital stock sold + Dividends declared

    = - $8,000 - $5,000 + $3,000

    Net loss = $10,000

    The financial capital maintenance requires income to determine the change in equity (assets). So here the details are not provided to reach income.
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