Net Income and Stockholders\' Equity for Four Businesses Four different corporat

Question

Net Income and Stockholders' Equity for Four Businesses Four different corporations, Cancer, Libra, Sagittarius, and Virgo, show the same balance sheet data at the beginning and end of a year. These data, exclusive of the amount of stockholders' equity, are summarized as follows: On the basis of the above data and the following additional information for the year, determine the net income (or loss) of each company for the year. Cancer: No additional common stock was issued, and no dividends were paid. Libra: No additional common stock was issued, but dividends of $5,900 were paid. Sagittarius: Additional common stock of $31,900 was issued, but no dividends were paid. Virgo: Additional common stock of $14,200 was issued, and dividends of $5,300 were paid.

Explanation / Answer

Opening capital.= OpeNing Assets - opening liabilities

=$81600 - $32600

= $49000

Closing capital = closing assets - closing liabilities

= $130600 - $54900

=$75700

Addition in capital is occurred due to current year income

= $ 75700 - 49000

= $ 26700

1. Cancer : no stock issued and no dividend paid. Hence its income would be $26700

2. Libra ; no stock issued but dividend is paid for $5900

So its income would be..$26700 - $5900 =$20800

3. Sagittarius : stock issued for $31900 but no dividend paid

Loss would be. $31900- 26700 = $5200

4. Virgo : stock issued $14200 and divided paid $5300

Let X = income

14200-5300 + x = 26700

X = $17800 income

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