This information relates to Harold Corporation:
Sales revenue, $90,000
Salaries and wages expense, $25,000
Insurance expense, $10,000
How much was Allen Corporation's net income?
First, determine the ending balance of stockholders' equity.
Ending stockholders' equity = beginning stockholders' equity + net income - dividends.
Ending stockholders' equity = $40,000 + 90,000 - 20,000 = $110,000.
Second, determine total liabilities
(i.e., Assets = Liabilities + Stockholders' equity)
Liabilities = $215,000 - 110,000 = $105,000.
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