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abbie marson is the sole owner and operator of great plains company. as of the end of its accounting period, december 31, year 1, great plains company has assets of $940,000 and liabilities of $300,000. during year 2, marson invested an additional $73,000 and withdrew $33,000 from the business. what is the amount of net income during year 2, assuming that as of december 31, year 2, assets were $995,000, and liabilities were $270,000? group of answer choices

Answer :

The net income in the end of year 2 of great plains company in this case would be $45,000.

How we get 45000 as net income?

Accounting Equation is used in order to calculate the closing capital figure of Year 1 and Year 2:

Assets=Liabilities + Equity.

we can rearrange the formula as Assets-Liabilities = Equity

So in Year 1. the closing capital is: $940000 -$300,000 = $640,000

In Year 2. the closing capital is : $995,000-$270,000 = $ 725,000

Now we can construct an equation to drive net income of year to by means of balancing figure:

Opening capital year 1:            $640,000

+ Additional Capital in Year 2: $73,000

-Drawing in year 2:                   $(33,000)

Net Income(Balancing figure)   $45,000              

Closing Capital Year 2:            $ 725,000        

To learn more about net income,  

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