This problem tests the ability to calculate total revenue, total expenses and net income or loss from an analysis of comparative balance sheets.
1. Total expenses = 4500 + 44800 + 1500 + 3000 = 53,800
2. Net income is computed by analyzing the change in retained earnings as follows:
a. Beginning retained earnings = 15,000
b. Subtract dividends paid out of 5,000
c. Subtract ending retained earnings of ...
The Smith Brothers problem tests the ability to interpret the changes in a comparative balance sheet to derive the essence of the income statement (which is not given).