Compute the net income earned by the business

Reference no: EM131648480

Problem - The accounting records of Nettle Distribution show the following assets and liabilities as of December 31, 2015 and 2016.

December 31	2015	2016
Cash	$64,300	$15,640
Accounts receivable	26,240	19,390
Office supplies	3,160	1,960
Office equipment	44,000	44,000
Trucks	148,000	157,000
Building	0	80,000
Land	0	60,000
Accounts payable	3,500	33,500
Note payable	0	40,000

During 2016, Mr. Nettle, the owner, invested $35,000 additional cash in the business (in exchange for more common stock). Late in December 2016, the business purchased a small building and land valued at $140,000. This purchase required $100,000 cash plus a $40,000 note payable. Also, the business pays $3,000 cash per month for dividends.

By comparing equity amounts from the balance sheets and using the additional information presented in this problem, compute the net income earned by the business in 2016.

Equity, December 31, 2015	$282,200
Add: Net income	11,145

	293,345

Less: Dividends
Equity, December 31, 2016	$293,345

Compute the 2016 year-end debt ratio for the business.

Reference no: EM131648480

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