A Company Which Lost Part of Its Accounting System in a Fire

Multiple Choice

A company which lost part of its accounting system in a fire is having trouble determining what its net income is for the current year. The following correct adjusted balances and additional information for the current year are available: $$\begin{array} { | l | l | l | } \hline & \text { Balances at Jan. 1 } & \text { Balances at DeC. 31 } \\\hline \text { Total as sets } & \$ 10,000 & \$ 27,000 \\\hline \text { Total liabilities } & 3,000 & 8,000 \\\hline\end{array}$$ Additional information for the year: $$\begin{array} { | l | l | } \hline \text { Stock dividend declared and distributed: } & \$ 5,000 \\\hline \text { Correction of prior years' error (cr.) : } & 2,000 \\\hline \text { Cash dividends declared and distributed: } &7,000 \\\hline\end{array}$$ Other than earnings and the events listed above, no other events or transactions affected owners' Equity in the current year. What was net income for the current year?

A) $12,000
B) $22,000
C) $17,000
D) $16,000