Question
At the end of the year, ABC Company's net assets were $60,000. Net income calculated by using the capital maintenance concept was $20,000. During the
At the end of the year, ABC Company's net assets were $60,000. Net income calculated by using the capital maintenance concept was $20,000. During the year, additional common stock was issued for $14,000, and $8,000 of dividends were paid. The net assets at the beginning of the year were
a.$31,000.
b.$20,000.
c.$34,000.
d.$25,000.
Which of the following statements regarding the capital maintenance concept is not true?
a.The capital maintenance concept implies net income for the period is the amount of money that can be distributed to shareholders as a return on capital, without being a return of capital.
b.Under the capital maintenance concept, income would be computed as the difference between the beginning and ending net assets, after any adjustments for additional investments or distributions to shareholders.
c.Under the capital maintenance concept, lifetime income would be computed as the total amount of cash distributed to shareholders minus the total amount of capital invested by shareholders.
d.The capital maintenance concept asserts that shareholders' capital must be maintained and therefore income is measured as the decrease in capital.
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