Question

The amounts of the assets and liabilities of Journey Travel Agency at December 31, 2018, the end of the year, and its revenue and expenses for the year follow. The retained earnings were $1,341,000 on January 1, 2018, the beginning of the year. During the year, dividends of $75,000 were paid.
Accounts payable $69,500 Miscellaneous Expense $14,500
accounts receivable $236,500 Rent expense $22,500
cash $190,500 supplies $7,000
common stock $450,000 supplies expense $11,300
Fees earned $383,500 utilities expense $16,700
Land $1,500,000 wages expense $170,000

Required:

a. Prepare an income statement for the year ended in December 31 2018
b. Prepare a retained earnings statement for the year
c. Prepare a balance sheet as of december 31 2018
d. What item appears on both the retained earnings statement adn the balance sheet?

Answer 1

Answer:

a.income statement for the year ended in December 31 2018

Fees earned                                                $383,500

Less Expenses :

Miscellaneous Expense      $14,500

Rent expense                     $22,500

Supplies expense                $11,300

Utilities expense                 $16,700

Wages expense                $170,000        ($235,000)

Net Income/(loss)                                        $148,500

b. retained earnings statement for the year

Opening Retained Earnings                     $1,341,000

Add Profit for the year                                $148,500

Less Dividends during the year                 ($75,000)

Closing  Retained Earnings                      $1,414,500

c. balance sheet as of December 31 2018

Assets

Non-Current Assets

Land                                                      $1,500,000

Total Non-Current Assets                    $1,500,000

Current Assets

Supplies                                                      $7,000

Accounts receivable                              $236,500

Cash                                                         $190,500

Total Non-Current Assets                      $434,000

Total Assets                                         $1,934,000

Equity and Liabilities

Equity

Common stock                                      $450,000

Retained Earnings                                $1,414,500

Total Equity                                          $1,864,500

Liabilities

Non-Current Liabilities

Total Non-Current Liabilities

Current Liabilities

Accounts payable                                  $69,500

Total Current Liabilities                         $69,500

Total Equity and Liabilities                $1,934,000

d. Profits for the year.

Explanation:

The Net Income has to be calculated first.

The calculated net income is used to determine the ending retained earnings balance for the year.

The Retained Earnings Balance for the year is part of Equity in the Balance Sheet.