Abbie Marson Is the Sole Owner and Operator of Great

question 34

Multiple Choice

Abbie Marson is the sole owner and operator of Great Plains Company. As of the end of its accounting period, December 31, Year 1, Great Plains Company has assets of $940,000 and liabilities of $300,000. During Year 2, Marson invested an additional $73,000 and withdrew $33,000 from the business. What is the amount of net income during Year 2, assuming that as of December 31, Year 2, assets were $995,000 and liabilities were $270,000?

• A) $45,000
• B) $50,000
• C) $106,000
• D) $370,000

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Definitions:

Limited Liability

A legal structure that limits the financial responsibility of individuals (e.g., shareholders of a company) to the amount they have invested.

Corporation's Liabilities

The financial obligations or debts for which a corporation is legally responsible.

Liability Limitation

A clause in a contract that restricts the amount of compensation that can be claimed for breaches of the contract or other liabilities.

Cash Assets

Liquid funds or assets readily convertible into cash without significant loss in value.