Calculation of net profit by analyzing changes to assets and liabilities.

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

ABC Company reports the following balance sheet information for 1997:

1 January 1997
---------------
Assets: $60,000
Liabilities: $12,000

31 December 1997
-----------------
Assets: $70,000
Liabilities: $14,000

Assume that new investments made by owners during 1997 were $3,000 and that withdrawals were $12,000. Find the net profit for 1997.

© BrainMass Inc. brainmass.com June 3, 2020, 4:44 pm ad1c9bdddf
https://brainmass.com/business/accounting-for-liabilities/calculation-of-net-profit-by-analyzing-changes-to-assets-and-liabilities-2669

Solution Preview

Step 1
-------
Calculate owner's equity at 1 Jan 1997

Assets = Owner's Equity + Liabilities
OE = A - L
OE = $60,000 ...

Solution Summary

The solution explains the calculations that are needed to derive net income, and shows the answer computed.

$2.19