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

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    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 March 4, 2021, 5:37 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.

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