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 $625,000 on January 1, 2018, the beginning of the year. During the year, dividends of $41,000 were paid.Accounts payable $ 68,500Accounts receivable 274,000Cash 187,500Common stock 70,000Fees earned 869,200Land 544,000Miscellaneous expense 6,500Rent expense 40,000Supplies 5,300Supplies expense 4,400Utilities expense 27,000Wages expense 503,000Required:1. Prepare an income statement for the year ended December 31, 2018. 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. If a net loss is incurred, enter that amount as a negative number using a minus sign. A colon (:) will automatically appear if it is required.2. Prepare a retained earnings statement for the year ended December 31, 2018. 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. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign. The word "Less" or "Add" is not needed in the Retained Earnings Statement.3. Prepare a balance sheet as of December 31, 2018. 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.4. What item appears on both the retained earnings statement and the balance sheet?

Answer 1

The T-account balance sheet for the bank shows total assets of $620 and total liabilities of $400. The bank's net worth is calculated as $220 by subtracting the total liabilities from the total assets. The net worth is listed under liabilities to balance the T-account.

Step-by-step explanation:

To set up a T-account balance sheet for the bank, we list the bank's assets on the left side and its liabilities on the right side. The net worth is calculated as the difference between the total assets and total liabilities, and it is listed under liabilities to make the T-account balance to zero.

Assets:

• Reserves: $50
• Government Bonds: $70
• Loans: $500

Liabilities + Net Worth:

• Deposits: $400

The assets total to $620 ($50 reserves + $70 government bonds + $500 loans). The liabilities total to $400 (all from deposits). Thus, the net worth is calculated by subtracting the total liabilities from the total assets:

Net Worth = Total Assets - Total Liabilities = $620 - $400 = $220

Therefore, we can conclude that the bank's net worth is $220. Finally, we include the net worth on the liabilities side to ensure that the assets equal liabilities plus net worth.