Question

The revenues and expenses of Paradise Travel Service for the year ended May 31, 2018, follow:Accounts (revenue and expense items) Fees earned $900,000Office expense 300,000Miscellaneous expense 15,000Wages expense 450,000 Prepare an income statement for the year ended May 31, 2018. Refer to the lists of Accounts in the information given, Labels, and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. If a net loss is incurred, enter that amount as a negative number using a minus sign.

Answer 1

Statement of Retained earnings May 31 2018

Beginning balance June 1 2017 $300,000.00

Add: Net Income for the year $135,000.00

Less: Cash dividends $10,000.00

Ending balance (May 31 2018) $425,000.00

Income Statement as at May 31 2018

Fee Earned $ 900,000.00

Less: Expenses

Office Expense $300,000.00

Miscellaneous Expense $15,000.00

Wages Expense $450,000.00 $765,000

Net Income for the Year $ 135,000.00

It is important to note that Issue of Common stock will increase the value of Common stock and ultimately shareholder's equity but it will not be shown in Statement of Retained earnings.