Exercise 4-1 Presented below are changes in all the account balances of Whisperi

Question

Exercise 4-1 Presented below are changes in all the account balances of Whispering Furniture Co. during the current year, except for retained earnings Increase Increase (Decrease) $(52,920) 82,720 131,600 (48,260) Paid-In Capital in Excess of Par Common Stock 15,050 (Decrease) 0,050 Accounts Payable Cash Accounts Receivable (net)49,800 Inventory Investments Bonds Payable 31,100 Common Stock 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 $28,190 which was paid in the current year. Net incomes

Explanation / Answer

Net increase in Assets:

Cash                         70050

Accounts receivable   49800

Inventory                  131100

Investment                (48260)

Net increase in Assets 202,690

Net Increase in Liabilities except Retained earnings:

Accounts payable                 (52920)

Bonds payable                      82720

Common STock                     131,600

Paid in capital                         15050

Net increase in Liabilities except Retained earnings 176450

To equalise the Total assets and total liabilities

Net increase in All the assets = Net increase in all the liabilities including Retained earnings

202,690 = 176,450+ Increase in Retained earnings

Therefore, Increase in Retained earnings = $ 26,240

This increase in retained earnings is deducting dividend paid of $ 28,190

Therefore, Gross increase in Retained earnings ( 26240+28190) = $54,430

Which is only due to net income of the current year

Therefore, Net income of the current year $ 54,430

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