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. During the year, Ian withdrew $42,000. Accounts Amounts At Jan. 1, 2016: Ian Eisele, capital $670,000 At Dec. 31, 2016: Accounts payable $ 69,500 Accounts receivable 285,000 Cash 190,500 Fees earned 912,500 Land 544,000 Miscellaneous expense 6,400 Rent expense 36,000 Supplies 5,500 Supplies expense 4,100 Utilities expense 28,500 Wages expense 510,000

Required:

1. Prepare an income statement for the year ended December 31, 2016.*

2. Prepare a statement of owner’s equity for the year ended December 31, 2016.*

3. Prepare a balance sheet as of December 31, 2016.* 4. What item appears on both the statement of owner’s equity and the balance sheet?

Answer 1

Answer and Explanation:

The presentation is shown below:

1. INCOME STATEMENT

Particulars $

Revenue (Fee Earned) 9,12,500

Less: Expenses

Rent expense 36,000

Wage expense 5,10,000

Utilities expense 28,500

Supplies expense 4,100

Miscellaneous expense 6,400

Total Expense 5,85,000

Net income 3,27,500

(2) STATEMENT OF OWNERS' EQUITY

Particulars $

Capital 6,70,000

Add: Net Income 3,27,500

Less: Drawings 42,000

Ending capital $955,500

(3) BALANCE SHEET

Particulars $

Cash 1,90,500

Supplies 5,500

Accounts Receivable 2,85,000

Current assets 4,81,000

Land 5,44,000

TOTAL ASSETS 10,25,000

Accounts payable 69,500

TOTAL LIABILITIES 69,500

Capital 6,70,000

Retained Earnings 2,85,500 ($327,500 - $42,000)

TOTAL EQUITY 9,55,500

TOTAL LIABILITIES AND EQUITY $10,25,000

(4) The Capital items appears on both the statement of owner’s equity and the balance sheet and the same is to be considered