Relating net income to balance sheet changes. The comparative balance sheets for Home Depot, a retailer of products for the home, as of December 31, Year 2, December 31, Year 3, and December 31, Year 4, appear below (amounts in millions):

Home Depot declared and paid dividends of \(\$ 110\) million during Year 3 and \(\$ 139\) million during Year 4.

a. Compute net income for Year 3 and Year 4 by analyzing the change in retained earnings.

b. Demonstrate that the following relation holds:
\[ \begin{aligned} \text { Net Income }= & \text { Increase in Assets }- \text { Increase in Liabilities } \\ & - \text { Increase in Contributed Capital }+ \text { Dividends } \end{aligned} \]

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HOME DEPOT Comparative Balance Sheet December 31, Year 2, Year 3, and Year 4 Year 2 Year 3 December 31 Year 4 Total Assets $7,354 $9,342 $11,229 Liabilities $2,290 $3,289 $ 4,015 Common Stock 2,485 2,646 2,784 Retained Earnings 2,579 3,407 4,430 Total Liabilities and Shareholders' Equity $7,354 $9,342 $11,229