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To determine Chavez's net income for Year 2, we will use the following relationships:

1. **Retained Earnings** at the end of Year 2 can be calculated using the formula:
   \[
   \text{Ending Retained Earnings} = \text{Beginning Retained Earnings} + \text{Net Income} - \text{Dividends Paid}
   \]
   
2. From the dataTo determine Chavez's net income for Year 2, we will use the following relationships:

1. **Retained Earnings** at the end of Year 2 can be calculated using the formula:
   \[
   \text{Ending Retained Earnings} = \text{Beginning Retained Earnings} + \text{Net Income} - \text{Dividends Paid}
   \]
   
2. From the 
   - **Ending Retained Earnings for Year 2** = $6,500
   - **Dividends paid** in Year 2 = $1,600

However, we do not directly have the **beginning retained earnings** for Year 2, but we can infer it from Year 1 data. Here’s the breakdown:

- **Assets in Year 1** = $13,500
- **Liabilities in Year 1** = $4,600
- **Common Stock in Year 1** = $2,800

Using the accounting equation:
\[
\text{Assets} = \text{Liabilities} + \text{Equity}
\]
Where Equity = Common Stock + Retained Earnings. So, we can calculate retained earnings at the beginning of Year 2:

\[
13,500 = 4,600 + (2,800 + \text{Beginning Retained Earnings})
\]

Solving for **Beginning Retained Earnings**:

\[
13,500 = 4,600 + 2,800 + \text{Beginning Retained Earnings}
\]
\[
13,500 = 7,400 + \text{Beginning Retained Earnings}
\]
\[
\text{Beginning Retained Earnings} = 13,500 - 7,400 = 6,100
\]

Now, substitute the known values into the retained earnings formula:

\[
6,500 = 6,100 + \text{Net Income} - 1,600
\]
\[
6,500 = 6,100 + \text{Net Income} - 1,600
\]
\[
6,500 = 4,500 + \text{Net Income}
\]
\[
\text{Net Income} = 6,500 - 4,500 = 2,000
\]

### Therefore, Chavez's net income for Year 2 is **$2,000**.

Would you like further clarification or details?

Here are 5 related questions:
1. How would net income change if dividends were increased?
2. How do assets, liabilities, and equity interrelate in a balance sheet?
3. Why are dividends subtracted when calculating retained earnings?
4. How does common stock affect the calculation of retained earnings?
5. Can net income be negative, and how does that affect retained earnings?

**Tip:** Always ensure that the accounting equation (Assets = Liabilities + Equity) balances when solving for missing values in financial problems.

Chavez Company had the following data. What was Chavez's net income for Year 2?

This problem shows how to calculate Chavez's net income for Year 2 using the accounting equation and retained earnings formula. The solution involves understanding the relationship between assets, liabilities, equity, dividends, and net income. Suitable for high school business or accounting students.

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