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:
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Current Assets:
- Cash: $184,500
- Accounts Receivable: $68,000
- Supplies: $17,500
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Total Current Assets: $270,000
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Non-Current Assets:
- Land: $880,000
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Total Non-Current Assets: $880,000
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Total Assets: $1,150,000
Liabilities:
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Accounts Payable: $35,000
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Total Liabilities: $35,000
Stockholders' Equity:
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Common Stock: $75,000
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Retained Earnings: $1,040,000
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Total Stockholders' Equity: $1,115,000
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.
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