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    Smith Brothers Balance Sheets

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    This problem tests the ability to calculate total revenue, total expenses and net income or loss from an analysis of comparative balance sheets.

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    Solution Preview

    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 ...

    Solution Summary

    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).