Completing a Balance Sheet and Inferring Net Income
Terry Lloyd and Joan Lopez organized Read More Store as a corporation; each contributed $50,000 cash to start the business and received 4,000 shares of common stock. The store completed its first year of operations on December 31, 2006. On that date, the following financial items for the year were determined: December 31, 2006, cash on hand and in the bank, $48,900; December 31, 2006, amounts due from customers from sales of books, $25,000; unused portion of store and office equipment, $49,000; December 31, 2006, amounts owed to publishers for books purchased, $7,000; one-year note payable to a local bank for $3,000. No dividends were declared or paid to the stockholders during the year.
1. Complete the following balance sheet as of the end of2006.
2. What was the amount of net income for the year? (Hint: Use the retained earnings equation [Beginning Retained Earnings +Net Income – Dividends = Ending Retained Earnings] to solve for net income.)