Question

The amounts of the assets and liabilities of Nordic Travel Agency at December 31, 2016, the end of the year, and its revenue and expenses for the year follow. The retained earnings were $615,000 on January 1, 2016, the beginning of the year. During the year, dividends of $35,000 were paid.
Accounts payable $73,500
Accounts receivable 288,000
Cash 186,000
Common stock 70,000
Fees earned 875,900
Land 542,000
Miscellaneous expense 6,600
Rent expense 30,000
Supplies 5,100
Supplies expense 4,200
Utilities expense 26,500
Wages expense 511,000

Required:
a. Prepare an income statement for the year ended December 31, 20Y5. Be sure to complete the statement heading. Refer to the lists of Accounts, Labels, and Amount Descriptions provided for the exact wording of the answer choices for text entries. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. Expenses should be positive. A colon (:) will automatically appear if it is required.
b. Prepare a retained earnings statement for the year ended December 31, 2016. Refer to the information given and the lists of Accounts, Labels, and Amount Descriptions provided for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. Enter all amounts as positive numbers. The word "Less" or "Add" is not needed in the Retained Earnings Statement.
c. Prepare a balance sheet as of December 31, 2016. Refer to the lists of Accounts, Labels, and Amount Descriptions provided for the exact wording of the answer choices for text entries. Be sure to complete the statement heading.
d. What item appears on both the retained earnings statement and the balance sheet?

Answer 1

Answer and Explanation:

The Preparation of the income statement is shown below:-

                                    Nordic Travel Agency

                                       Income Statement

                       For the year ended December 31, 2016

Particulars                                            Amount

Fees earned                                           $875,900

Less: Expenses

Miscellaneous expense                         -$6,600

Rent expense                                         -$30,000

Supplies expense                                   -$4200

Utilities expense                                     -$26,500

Wages expense                                      -$511,000

Net income                                               $297,600

2. The Preparation of retained earnings is shown below:-

                                    Nordic Travel Agency

                                       Balance sheet

                       For the year ended December 31, 2016

Particulars                                                  Amount

Balance as on January 1, 2016                  $615,000

Add: Net income                                         $297,600

Less: Dividend                                            -$35,000

Balance as on December 31, 2016            $877,600

3. The Preparation of balance sheet is shown below:-

                                    Nordic Travel Agency

                                       Balance sheet

                       For the year ended December 31, 2016

Assets:                                                    Amount

Current Assets  

Accounts receivable                              $288,000

Cash                                                          $186,000

Supplies                                                    $5,100

Total Current Assets                                 $479,100

Land                                                           $542,000

Total Assets                                               $1,021,100

Liabilities

Accounts payable                                     $73,500

Total Liabilities                                          $73,500

Equity

Common stock                                          $70,000

Retained Earnings                                      $877,600

Total Equity                                                 $947,600

Total Liabilities and Equity                        $1,021,100

4. The retained earnings should be displayed both in the retained earnings statement and the balance sheet