Purchase Solution

# 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.

##### Solution Summary

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

##### Solution Preview

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

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

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