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Q: Calculating Net Income ( No Answer,   2 Comments )
Subject: Calculating Net Income
Category: Business and Money > Accounting
Asked by: ydorb-ga
List Price: $5.00
Posted: 09 Jul 2006 11:11 PDT
Expires: 08 Aug 2006 11:11 PDT
Question ID: 744702
How do I calculate net income or 2004 if I have year end account
balances as follows:
2003 - $200,000
2004 - $250,000
In 2004 - issued $15,000 in stock and had $20,000 in dividends.
There is no answer at this time.

Subject: Re: Calculating Net Income
From: amosdavidson-ga on 09 Jul 2006 20:32 PDT
Here's a formula to answer this question:
2004 net income = 2004 ending balance - 2004 starting balance - cash
received from issuance of stock + cash paid out in dividends.
In numbers, we have 2004 net income = $250,000 - $200,000 - $15,000 +
$20,000 = $55,000.

These figures would be found on the company's Statement of Cash Flow.
In summary, you observe that the company has $50,000 more cash at the
end of 2004 than it started with, and during 2004 it paid $20,000 and
received $15,000, meaning that it must have earned (net income)
$55,000 during the year.
Subject: Re: Calculating Net Income
From: fsu_erik-ga on 11 Jul 2006 02:37 PDT
You did not specify which account balances those are. If they are
retained earnings balances (as opposed to cash), you can calculate net
income easily. Stock issuance has no effect and is ignored. Dividends
are added back since they are subtracted from retained earnings but
have no bearing on net income. Therefore Net income for 2004 will be

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