Question
Al Shea is the sole owner and operator of SawTooth Company. As of the end of its accounting period, December 31, 20013, SawTooth Company has
Al Shea is the sole owner and operator of SawTooth Company. As of the end of its accounting period, December 31, 20013, SawTooth Company has assets of $925,000 and liabilities of $285,000. During 20014, Al Shea invested an additional $50,000 and paid dividends of $30,000 from the business. What is the amount of net income during 2008, assuming that as of December 31, 20014, assets were $980,000, and liabilities were $255,000? a. $ 95,000 b. $ 65,000 c. $165,000 d. $725,000 I am confused here, because dividends should be subtracted from the retained earnings statement and investments should be on a cash flow statement. Please explain how to solve this. Explain why dividends are added and investments are less.
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