Question

he account balances of A-One Travel Service for the year ended August 31, 20Y6, follow:

Account Amount
Fees earned $1,150,000
Office expense 150,000
Miscellaneous expense 45,000
Wages expense 640,000
Accounts payable 35,000
Accounts receivable 68,000
Cash 184,500
Common stock 75,000
Land 880,000
Supplies 17,500
Cash dividends of $50,000 were paid during the year. Retained earnings as of September 1, 20Y5, were $775,000.

Prepare a balance sheet as of August 31, 20Y6. When entering assets, enter them in order of liquidity.

Answer 1

To prepare a balance sheet for A-One Travel Service as of August 31, 20Y6, we will first calculate the net income for the year, determine the retained earnings at the end of the period, and then list the assets, liabilities, and equity accordingly.

### Step 1: Calculate Net Income

Net Income can be calculated using the formula:

\[ \text{Net Income} = \text{Fees Earned} - \text{Total Expenses} \]

**Total Expenses:**
- Office Expense: $150,000
- Miscellaneous Expense: $45,000
- Wages Expense: $640,000

Total Expenses = $150,000 + $45,000 + $640,000 = $835,000

**Net Income Calculation:**

\[ \text{Net Income} = \$1,150,000 - \$835,000 = \$315,000 \]

### Step 2: Calculate Retained Earnings

Retained Earnings at the end of the period can be calculated as:

\[ \text{Retained Earnings (Ending)} = \text{Retained Earnings (Beginning)} + \text{Net Income} - \text{Dividends} \]

Beginning Retained Earnings = $775,000
Net Income = $315,000
Dividends = $50,000

\[ \text{Retained Earnings (Ending)} = 775,000 + 315,000 - 50,000 = 1,040,000 \]

### Step 3: Prepare the Balance Sheet

Now, we can prepare the balance sheet using the information we have:

**A-One Travel Service**
**Balance Sheet**
**As of August 31, 20Y6**

**Assets:**
- Current Assets:
- Cash: $184,500
- Accounts Receivable: $68,000
- Supplies: $17,500
- Total Current Assets: $270,000

- Non-Current Assets:
- Land: $880,000
- Total Non-Current Assets: $880,000

- **Total Assets: $1,150,000**

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**Liabilities:**
- Accounts Payable: $35,000

- **Total Liabilities: $35,000**

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**Stockholders' Equity:**
- Common Stock: $75,000
- Retained Earnings: $1,040,000

- **Total Stockholders' Equity: $1,115,000**

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**Total Liabilities and Stockholders' Equity: $1,150,000**

This balance sheet shows that the total assets equal the sum of total liabilities and equity, which confirms it is balanced.