Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 1 The Role of Accounting in Business 51

Therefore, if assets are $20,000 and liabilities are $12,000,
stockholders’ equity is $8,000 (answer D), as indicated in the
following computation:

Assets LiabilitiesStockholders’ Equity

$20,000 $12,000Stockholders’ Equity

$20,000$12,000Stockholders’ Equity

$8,000 Stockholders’ Equity

5. B Net income is the excess of revenue over expenses, or
   $7,500 (answer B). If expenses exceed revenue, the difference
   is a net loss. Dividends are the opposite of the stockholders
   investing in the business and do not affect the amount of net
   income or net loss.