E4-1 (Computation of Net Income) Page 192

Presented below are changes in all the account balances of Fritz Reiner Furniture Co. during the current year, except for retained earnings.

	Increase (Decrease)		Increase (Decrease)
Cash Accounts Receivable (net) Inventory Investments Accounts Payable Bonds Payable Common Stock Paid-In Capital in Excess of ParCommon Stock	$ 79,000 45,000 127,000 (47,000) (51,000) 82,000 125,000 13,000	Accounts Payable Bonds Payable Common Stock Paid-In Capital in Excess of ParCommon Stock	$ (51,000) 82,000 125,000 13,000

Instructions

Compute the net income for the current year, assuming that there were no entries in the Retained Earnings account except for net income and a dividend declaration of $19,000 which was paid in the current year.

Extra

If possible could you explain to me what the cash represents in this? The chapter from the book is only dealing with the income statement with cost of goods sold, administrative expenses, Operating expenses etc... so I have no idea why they would throw cash in here without a description along with these other items.

Also, I understand that Net Income = Total Revenues - Total Expenses. If possible after the problem is worked out could you quickly explain to me how each of these items fit into each category (Revenues/Expenses)

I just want to understand how to arrive at the solution and not just have the answer to the problem. Thank you so much for your time!