Question

The accounting equation elements and their balances of Awesome Travel Services at December 31 are listed below. There were no additional investments or withdrawals by J. Trendsetter during the year.
Accounts payable $12,000 J. Trendsetter, capital
(January 1) $10,000
Accounts receivable 14,000 Supplies 1,000
Cash 18,000 Income taxes expense 1,300
Computer equipment 21,000 Utilities expense 8,000
Fees earned 78,000 Wages expense 25,000
Rent expense 10,000 Supplies expense 1,700
Prepare an income statement, statement of owner's equity and a balance sheet as of December 31.

Answer 1

Answer:

A. $32,000

B. $42,000

C. $54,000

Explanation:

A.Preparation of an income statement

J. Trendsetter Income StatementFor the Year Ended December 31

Fees earned$78,000

Less Operating expenses:

Wages expense$25,000

Rent expense10,000

Utilities expense8,000

Supplies expense1,700

Income taxes expense1,300

Total expenses 46,000

Net income$32,000

($78,000-46,000)

Therefore Income StatementFor the Year Ended December 31 will be $32,000

B. Preparation of statement of owner's equity

J. Trendsetter Statement of owners equity

As at December 31

J. Trendsetter, Capital 1/1 $10,000

Add Net income $32,000

Capital 12/31 $42,000

Therefore Statement of owners equity

As at December 31 will be $42,000

C.Preparation of balance sheet as of December 31.

J. Trendsetter Balance Sheet

As at December 31

ASSETS

Computer Equipment 21,000

Accounts Receivable 14,000

Supplies 1,000

Cash 18,000

Total Assets $54,000

Liabilities and Owner's Equity

CURRENT LIABILITIES

Accounts Payable $12,000

Owner's Equity $42,000

Total liabilities and owner's equity $54,000

Therefore balance sheet as of December 31 for both Total Assets and Total Liabilities will be $54,000