E1-10 Lily Company had the following assets and liabilities on the dates indicat
ID: 2386369 • Letter: E
Question
E1-10
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, 2009, 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 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.
$
(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.
$
Explanation / Answer
Dec 31...Total Assets...Total Liabs.......OE 2007......$400,000........$250,000....… 2008......$460,000........$300,000....… 2009......$590,000........$400,000....… 1.1.07 Assets = Liabs + OE $100k = $0 + $100k (a) net income (or loss) for 2007, assuming Lily's drawings were $15,000 for the year. OE increased from $100k to $150k, ie. an increase of $50k, but this is after drawings of $15,000, so net income was $65,000 (b) net income (or loss) for 2008, assuming Lily made an additional investment of 50,000 and had no drawings in 2008 OE increased from $150k to $160k, ie. $10,000, but this is after add'l investment of $50k, so net income was actually a loss ($40,000) c)net income (or loss) for 2009, assuming Lily made an additional investment of $15,000 and had drawings of $30,000 in 2009 OE increased from $160k to $190k, ie. $30k but this is after additional investment of $15,000 and drawings of $30,000, so net income was $45,000.
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