Answer:
Paradise Travel Service
Balance Sheet As 31st May, 2018
Assets
Fixed Assets
Land 450,000
Current Assets
Accounts receivable 38,000
Cash 52,000
Supplies 3,000
Total Assets 543,000
Liabilities and Owner Equity
Current Liability
Accounts payable 18,000
Owner's Equity
Common stock 100,000
Net Profit 135,000
Retained earnings May 31, 2018 290,000
Total Liabilities 543,000
Explanation:
COMPUTATION OF RETAINED EARNINGS
Retained earnings June 1, 2017 300,000
Less Dividend Paid 10,000
Retained earnings May 31, 2018 290,000
COMPUTATION OF NET PROFIT
Account Fees Earned 900,000
Office expenses 300,000
Miscellaneous expense 15,000
Wages expense 450,000
Total Expenses 765,000
Net Profit 135,000
Answer:
Total Asset = $543,000
Liability = $18,000
Total Equity = $525,000
Note: See the attached for the balance sheet.
Explanation:
Net income = Accounts Fees earned - Office expense - Miscellaneous expense - Wages expense
= $900,000 - $300,000 - $15,000 - $450,000
Net income = $135,000
Ending retained earnings at 31 May 2018 = Retained earnings as of 1 June 2017 + Net Income – Dividend paid
= $300,000 + $135,000 - $10,000
Ending retained earnings at 31 May 2018 = $425,000
Paradise Travel Service’s Balance sheet as of May 31, 2018
Using the information above, the Paradise Travel Service’s Balance sheet as of May 31, 2018 is prepared as attached.
In the attached file,
Total Asset = $543,000
Liability = $18,000
Total Equity = $525,000
Using the Accounting equation bellows:
Asset = Equity – Liability
We have:
$543,000 = $525,000 - $18,000 = $543,000
Therefore, $543,000 = $543,000, which implies the accounting equation holds.
Note: See the attached for the balance sheet.
