Craft Corp

question 17

Essay

Craft Corp. began operations on January 1, 2015. The statement of cash flows for the first year reported dividends paid of $160,000. The balance sheet at the end of the first year reported $40,000 in dividends payable and $580,000 in ending retained earnings. Determine Craft's net income for its first year of operations.

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Definitions:

Current Portion

The portion of long-term liabilities that is due to be paid within the next twelve months.

Operating Lease

A leasing agreement that allows for the use of an asset but does not convey rights of ownership, often treated as an operational expense rather than a capital expense.

Lease Liability

An obligation representing the present value of future lease payments under a leasing agreement.

Present Value

The current valuation of a future sum or ongoing cash flows, given a specified rate of interest.