Calculate Net Income in each separate scenario:
Total Assets Total Liabilities
Beg. of year $ $
End of year $ $
Co A No additional capital stock was issued, and no dividends were paid
Co B No additional capital stock was issued, but dividends of $ were paid out.
Co C Capital stock of $ was issued, but no dividends were paid.
Co D Capital stock of $ was issued, and dividends of $ were paid.
Assets Liabilities Equity
$
Increase in equity is: $
The increase in equity can be attributable to two things:
a Increase in stock
b Increase in Retained Earnings RE which is attributable to Net Income NI minus Dividends
Co ASince the increase is only attributable to an increase in RE that means that NI was $
Co BSince the increase is only attributable to an increase in RE and dividends of $ were paid then the following equation is used:
Beg. RE NI Dividends Ending RE
NI
NI $
Co C
Co D
