Question

The account balances of Paradise Travel Service for the year ended May 31, 20Y6, follow: Fees earned $944,970 Office expense 217,345 Miscellaneous expense 18,900 Wages expense 453,585 Accounts payable 23,625 Accounts receivable 66,150 Cash 253,375 Common stock 135,000 Land 302,000 Supplies 11,340 Cash dividends of $35,900 were paid during the year. Retained earnings as of June 1, 20Y5, were $255,000. Prepare the balance sheet as of May 31, 20Y6. When entering assets, enter them in order of liquidity.

Answer 1

Retained earnings as of May 31, 20Y6 = $474,240

Net Assets = Total Owners' Equity = $609,240

Step-by-step explanation:

To do this, the income statement is first prepared to determine the Retained earnings as of May 31, 20Y6 as follows:

Paradise Travel Service

Income Statement

for the year ended May 31, 20Y6

Particulars $

Fees earned 944,970

Office expense (217,345)

Miscellaneous expense (18,900)

Wages expense (453,585)

Net income 255,140

Cash dividends paid (35,900)

Retained earning for the year 219,240

Retained earnings as of June 1, 20Y5 255,000

Retained earnings as of May 31, 20Y6 474,240

The Balance Sheet is now prepared as follows:

Paradise Travel Service

Balance Sheet

for the year ended May 31, 20Y6

Particulars $

Fixed Assets

Land 302,000

Current Assets

Cash 253,375

Accounts receivable 66,150

Supplies 11,340

Total Assets 632,865

Liability

Accounts payable (23,625)

Net Assets 609,240

Owners' Equity:

Common stock 135,000

Retained earnings as of May 31, 20Y6 474,240

Total owners' equity 609,240

Note that Net Assets and Total Owners' Equity are both equal to $609,240. This is as required in accounting and it shows the Balance Sheet is accurately prepared.