NI Calc

[clearchemist]

Simple question, but not getting it, why are dividends added back and SHE subtracted here to get the right answer:
Calculate NI and Change in stocholder equity for Year 2
Year 1: Assets = 70K, Liab = 45K
Year 2: Assets = 82K, Liab = 5K
Also provided: Stockholder investments = 3K, NI = ?, Dividends = 6K
Correct Answer: Delta OE = 27K, NI = 5K
Thanks

 

[achokshi]

clearchemist wrote:
Simple question, but not getting it, why are dividends added back and SHE subtracted here to get the right answer:
Calculate NI and Change in stocholder equity for Year 2
Year 1: Assets = 70K, Liab = 45K
Year 2: Assets = 82K, Liab = 5K
Also provided: Stockholder investments = 3K, NI = ?, Dividends = 6K
Correct Answer: Delta OE = 27K, NI = 5K
Thanks

Change in equity doesn’t make sense to me with the info provided.
Just using the simple A = L + E equation, year 1 equity = 70 -45 = 25
year 2 equity = 82 - 5 = 77
Change in equity is 52

 

[lawnm0wer]

Not that it isn’t possible, butyou have liabilities going from 45k to 5k.