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
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Assets: $60,000
Liabilities: $12,000
31 December 1997
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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.
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Solution Preview
Step 1
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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.
$2.49