Total Assets Total Liabilities
Beginning of the year $550,000 $215,000
End of the year 844,000 320,000
On the basis of the preceding data and the following additional information for the year, determine the net income (or loss) of each company for the year.
(Hint: First determine the amount of increase or decrease in stockholders' equity during the year.)
Jupiter: No additional common stock was issued and no dividends were paid.
Mars: No additional common stock was issued, but dividends of $36,000 were paid.
Saturn: Additional common stock of $60,000 was issued, but no dividends were paid.
Venus: Additional common stock of $60,000 was issued and dividends of $36,000 were paid.
Jupiter Net Income
$
Mars Net Income
$
Saturn Net Income
$
Venus Net Income
$
To determine the net income (or loss) for each company, we need to calculate the change in stockholders' equity during the year. The change in stockholders' equity can be obtained by subtracting the beginning stockholders' equity from the ending stockholders' equity.
Let's calculate the change in stockholders' equity for each company:
Jupiter:
Beginning of year stockholders' equity = Total Assets - Total Liabilities
= $550,000 - $215,000
= $335,000
End of year stockholders' equity = Total Assets - Total Liabilities
= $844,000 - $320,000
= $524,000
Change in stockholders' equity = End of year stockholders' equity - Beginning of year stockholders' equity
= $524,000 - $335,000
= $189,000
So, the net income for Jupiter is $189,000.
Mars:
Beginning of year stockholders' equity = Total Assets - Total Liabilities
= $550,000 - $215,000
= $335,000
End of year stockholders' equity = Total Assets - Total Liabilities
= $844,000 - $320,000
= $524,000
Change in stockholders' equity = End of year stockholders' equity - Beginning of year stockholders' equity
= $524,000 - $335,000
= $189,000
Since dividends of $36,000 were paid, we need to subtract it from the change in stockholders' equity.
Net income for Mars = Change in stockholders' equity - Dividends
= $189,000 - $36,000
= $153,000
So, the net income for Mars is $153,000.
Saturn:
Beginning of year stockholders' equity = Total Assets - Total Liabilities
= $550,000 - $215,000
= $335,000
End of year stockholders' equity = Total Assets - Total Liabilities
= $844,000 - $320,000
= $524,000
Change in stockholders' equity = End of year stockholders' equity - Beginning of year stockholders' equity
= $524,000 - $335,000
= $189,000
Since no dividends were paid, net income for Saturn is equal to the change in stockholders' equity.
So, the net income for Saturn is $189,000.
Venus:
Beginning of year stockholders' equity = Total Assets - Total Liabilities
= $550,000 - $215,000
= $335,000
End of year stockholders' equity = Total Assets - Total Liabilities
= $844,000 - $320,000
= $524,000
Change in stockholders' equity = End of year stockholders' equity - Beginning of year stockholders' equity
= $524,000 - $335,000
= $189,000
Since additional common stock of $60,000 was issued and dividends of $36,000 were paid, we need to adjust the change in stockholders' equity.
Net income for Venus = Change in stockholders' equity + Additional common stock - Dividends
= $189,000 + $60,000 - $36,000
= $213,000
So, the net income for Venus is $213,000.
In summary, the net income (or loss) for each company for the year is as follows:
Jupiter: $189,000
Mars: $153,000
Saturn: $189,000
Venus: $213,000