Over a given year, a firm's total assets increased by $8,000 and total liabilities decreased by $6,000. If the firm did not issue any new equity and paid out $1,800 in dividends, then its net income during the year was ________.
Click on the arrows to vote for the correct answer
A. B. C. D.D
Total assets - Total liabilities = Equity. Hence,
Change in Assets - Change in Liabilities = Change in Equity.
Thus, change in equity = 8,000-(-6,000) = $14,000 All of the net income not paid out as dividends goes into increasing the equity. Since no new shares were issued, Net Income = change in equity + dividends paid. This gives net income = $14,000 + $1,800 = $15,800.