Answer (B) is correct . To calculate net income, the dividend payment ($52,000) should be added to the increase in assets ($356,000). The excess of this sum ($408,000) over the increase in liabilities ($108,000) gives the total increase in owners’ equity ($300,000). The excess of this amount over the combined increases in the capital accounts ($264,000) equals the increase in retained earnings ($36,000) arising from net income.
Answer (A) is incorrect because The amount of $16,000 is the excess of the sum of the increases in the capital accounts other than retained earnings over the increase in net assets.
Answer (C) is incorrect because The amount of $52,000 is the dividend.
Answer (D) is incorrect because The amount of $68,000 equals the sum of the dividend and the excess of the sum of the increases in the capital accounts other than retained earnings over the increase in net assets.
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Assuming there are no charges to retained earnings other than for a dividend payment of $52,000, the net income for the year should be