91Ó°ÊÓ

Presented below are changes in all the account balances of Fritz Mayhew Furniture Co. during the current year, except for retained earnings.

Increase Increase

(Decrease) (Decrease)

Cash \(79,000 Accounts Payable

Accounts Receivable (net) \)45,000 Bonds Payable \(82,000

Inventory \)127,000 Common Stock \(125,000

Investments (47,000) Paid-In Capital in Excess of Par \)13,000

Instructions

Compute the net income for the current year, assuming that there were no entries in the Retained Earnings account except for net income and a dividend declaration of $19,000 which was paid in the current year.

Step by step solution

01

Meaning of Inventory

Inventory refers to the goods used for production during the regular course of business. Raw materials, work-in-progress, and finished goods are the general categories of inventory.

02

Calculation of Net Income

Particulars	Amount ($)
Increase in Cash	$79,000
Add: Decrease in Accounts Payable	$51,000
Add: Increase in Accounts Receivables	$45,000
Less: Increase in Bonds Payable	($82,000)
Add: Increase in Inventory	$127,000
Less: Increase in Common Stock	($125,000)
Less: Decrease in investments	($47,000)
Less: Increase in paid-in-capital	($13,000)
Add: Dividend Declared	$19,000
Net Income	$54,000

Unlock Step-by-Step Solutions & Ace Your Exams!

• Full Textbook Solutions

  Get detailed explanations and key concepts

• Unlimited Al creation

  Al flashcards, explanations, exams and more...

• Ads-free access

  To over 500 millions flashcards

• Money-back guarantee

  We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91Ó°ÊÓ!