PR 1-2A Financial statements

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. The retained earnings were $600,000 on January 1, 2016, the beginning of the year. During the year, dividends of $42,000 were paid.

Accounts payable $ 69,500 

Miscellaneous expense $ 6,400

Accounts receivable 285,000 

Rent expense 36,000

Cash 190,500 

Supplies 5,500

Common stock 70,000 

Supplies expense 4,100

Fees earned 912,500 

Utilities expense 28,500

Land 544,000 

Wages expense 510,000

Instructions

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

2. Prepare a retained earnings statement for the year ended December 31, 2016.

3. Prepare a balance sheet as of December 31, 2016.

4. What item appears on both the retained earnings statement and the balance sheet?

Answer:

NORDIC TRAVEL AGENCY Income Statement For the Year Ended December 31, 2016 Fees earned $912,500 Expenses: Wages expense $510,000 Rent expense 36,000 Utilities expense 28,500 Supplies expense 4,100 Miscellaneous expense 6,400 Total expenses 585,000 Net income $327,500 NORDIC TRAVEL AGENCY Retained Earnings Statement For the Year Ended December 31, 2016 Retained earnings, January 1, 2016 $600,000 Net income for the year $327,500 Less dividends 42,000 Increase in retained earnings 285,500 Retained earnings, December 31, 2016 $885,500 NORDIC TRAVEL AGENCY Balance Sheet December 31, 2016 Assets Liabilities Cash $  190,500 Accounts payable $ 69,500 Accounts receivable 285,000 Supplies 5,500 Land 544,000 Stockholders’ Equity Common stock $ 70,000 Retained earnings 885,500 Total stockholders’ equity 955,500 Total liabilities and Total assets $1,025,000 stockholders’ equity $1,025,000 4.  Retained earnings of $885,500