Asked by Riley Jackson on Jun 05, 2024
Verified
At October 1 Flambo Company reported owner's equity of $70000. During October no additional investments were made and the company earned net income of $18000. If owner's equity at October 31 totals $80000 what amount of owner drawings were made during the month?
A) $0
B) $8000
C) $10000
D) $26000
Net Income
The total earnings of a company after all expenses and taxes have been deducted from revenue.
Owner's Equity
The residual interest in the assets of an entity after deducting liabilities, representing the ownership interest in the company.
Owner's Drawings
The funds taken from the business by the owner for personal use, not considered as salary or wages.
- Discern the repercussions of transactions on the equity of the proprietor and the financial standing of the corporation.
Verified Answer
AL
Alexa LaurenJun 09, 2024
Final Answer :
B
Explanation :
The owner's equity increased by $10,000 ($80,000 - $70,000) due to the net income of $18,000. Therefore, drawings must have been $8,000 to reduce the increase to $10,000.
Learning Objectives
- Discern the repercussions of transactions on the equity of the proprietor and the financial standing of the corporation.