Using the accounting equation to determine net income (Learning Objectives 5 & 6 ) 15–20 min.

The balance sheet data for Cindy’s Office Supplies, Co., at October 31, 2014, and November 30, 2014, follow:

Total Assets ..........................................................................

Total Liabilities......................................................................

Common Stock .....................................................................

Total Stockholders’ Equity ....................................................

$127,000 92,000 15,000

?

Oct 31, 2014

$165,000 119,000 15,000

?

Nov 30, 2014 Requirement 1. The following are three independent assumptions about the business during November. For each assumption, compute the amount of net income or net loss during November 2014. Find the solution by preparing the statement of retained earnings. First, use the amounts of total assets, total liabilities, and common stock given previously and the accounting equation to determine the beginning and ending retained earnings amounts. Then plug those and the other amount given in each assumption into the statement of retained earnings to determine the net income or net loss.

a. The business paid no dividends.

b. The business paid $7,000 of dividends.

c. The business paid $15,000 of dividends.

AppendixLO1