Lily company had the following assets and liabilities on the dates indicated: DE

Question

Lily company had the following assets and liabilities on the dates indicated: DECEMBER 31 TOTAL ASSETS TOTAL LIABILITIES 2009 $400,000 $250,000 2010 $460,000 $300,000 2011 $590,000 $400,000 Lily began business on January 1,209, with an investment of $100,000 INSTRUCTIONS: From an analysis of the change in owner's equity during the year, compute the net income (or loss) for: (a) 2009, assuming Lily's drawing were $15,000 for the year (b) 2010, assuming Lily made an additional investment of $50,000 and had no drawings in 2010 (c) 2011, assuming Lily made an additional investment of $15,000 and had drawings of $30,000 in 2011. THANK YOU!

Explanation / Answer

December 31 Total Assets Total Liabilities 2009 $400,000 - $250,000 = $150,000 equity 2010 $460,000 - $300,000 = $160,000 equity 2011 $590,000 - $400,000 = $190,000 equity Beg. Equity + net income + added investments - drawings = End. Equity From an analysis of the change in owner's equity during the year, compute the net income (or loss) for the following situations. (If a net loss, record amount using either a negative sign preceding the number eg -45 or parentheses eg (45).) (a) 2009, assuming Lily's drawings were $15,000 for the year. 100,000 + net income + 0 - 15,000 = 150,000 Net Income = $65,000 (b) 2010, assuming Lily made an additional investment of 50,000 and had no drawings in 2010. 150,000 + net income + 50,000 - 0 = 160,000 Net Income = ($40,000) loss (c) 2011, assuming Lily made an additional investment of $15,000 and had drawings of $30,000 in 2011. 160,000 + net income + 15,000 - 30,000 = 190,000 Net Income = $45,000 Source(s): Accounting Fan

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