John’s Cream Soda, Inc., makes specialty soft drinks. At the end of 2012, John’s had total assets of $390,000 and liabilities totaling $260,000.
1. Write the company’s accounting equation, and label each amount as a debit or a credit.
2. The business’s total revenues for 2012 were $480,000, and total expenses for the year were $350,000. How much was the business’s net income (or net loss) for 2012? Write the equation to compute the company’s net income, and indicate which element is a debit and which is a credit. Does net income represent a net debit or a net credit?