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. 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 Accounts receivable 285,000 Cash 190,500 Common stock 70,000 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. Refer to the Accounts given in the Instructions and to the lists of 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, 2016. Refer to the Accounts given in the Instructions and to the lists of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. Enter all amounts as positive numbers. The word “Less” or “Add” is not needed in the Retained Earnings Statement. 3. Prepare a balance sheet as of December 31, 2016. Refer to the Accounts given in the Instructions and to the lists of 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

(1).

Nordic Travel Agency
Income Statement
For the year ending December 31, 2016
Fees Earned		$912500
Expenses:
Wages expense	$510000
Utilities expense	$28500
Supplies expense	$4100
Rent expense	$36000
Miscellaneous expense	$6400
Total Expenses		($585000)
Net Income		$327500

(2).

Nordic Travel Agency
Retained Earnings Statement
For the year ending December 31, 2016
Beginning retained earnings	$600000
Net income for the year	$327500
Dividends paid in the year	$42000
Ending retained earnings	$885500

(3).

Note;

Format of the Balance Sheet may be differ hence I am preparing balance sheet in the format which is simple in understanding.

Nordic Travel Agency
Balance Sheet
December 31, 2016
Assets		Liabilities
Cash	$190500	Accounts payable	$69500
Land	$544000	Shareholders’ Funds
Accounts Receivable	$285000	Common stock	$70000
Supplies	$5500	Retained Earnings	$885500
	$1025000		$1025000

Working Note;

Ending balance of retained earnings is shown in the balance sheet hence ending balance is shown in the balance sheet.

(4).

As we see both Retained Earnings Statement and Balance Sheet then we find that ending balance of retained earnings $885500 is shown in both Retained Earnings Statement and Balance Sheet.