In Chapter 3 we have learned that net income is an increase in owners equity res
ID: 2332459 • Letter: I
Question
In Chapter 3 we have learned that net income is an increase in owners equity resulting from profitable operations. Previously, Chapter 2 explained that when a business is organized as a corporation, retained earnings represents the increase in stockholders equity that has accumulated over the years as a result of profitable operations. Thus, net income for any one year should explain a large part of the change in retained earnings from the beginning of the year to the end. Go to: http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-reportsAnnual or http://www.jcpenney.com Find net income for 2006. Now compute the difference between retained (reinvested) earnings at the beginning of the year and at the end. How closely does this approximate the 2005 net income?
Explanation / Answer
ANSWER:
Here we have to determine the differences between retained earnings of starting and ending of the years,
As mentioned above problem,we consider the annual reports of given links ,
now,
Net wage for 2006 = 1153m
What's more, difference between investors value for 2006 and 2005 for reinvested inomce = 410m
Here this esteem isn't comparable to net wage of 2005 as the compamy had bought back offers of 750m and furthermore paid profit of 153m
Consequently estimation of contrast isn't equivalent to the net salary of a year ago