Following are the amounts of the assets and liabilities of Oriental Travel Agency at December 31, 2014

Following are the amounts of the assets and liabilities of Oriental Travel Agency at December 31, 2014, the end of the current year, and its revenue and expenses for the year. The capital of Sung Kim, owner, was $450,000 on January 1, 2014, the beginning of the current year. During the current year, Sung withdrew $25,000.


Accounts payable $ 115,000 Rent expense $150,000
Accounts receivable 370,000 Supplies 20,000
Cash 210,000 Supplies expense 14,000
Fees earned 1,100,000 Utilities expense 79,000
Land 300,000 Wages expense 490,000
Miscellaneous expense 7,000


Instructions

1. Prepare an income statement for the current year ended December 31, 2014.

2. Prepare a statement of owner’s equity for the current year ended December 31, 2014.

3. Prepare a balance sheet as of December 31, 2014.

4. What item appears on both the statement of owner’s equity and the balance sheet?


Answer:

1. ORIENTAL TRAVEL AGENCY
Income Statement
For the Year Ended December 31, 2014
Fees earned $1,100,000
Expenses:
Wages expense $490,000
Rent expense 150,000
Utilities expense 79,000
Supplies expense 14,000
Miscellaneous expense 7,000
Total expenses 740,000
Net income $ 360,000
2. ORIENTAL TRAVEL AGENCY
Statement of Owner’s Equity
For the Year Ended December 31, 2014
Sung Kim, capital, January 1, 2014 $450,000
Net income for the year $360,000
Less withdrawals 25,000
Increase in owner’s equity 335,000
Sung Kim, capital, December 31, 2014 $785,000
3. ORIENTAL TRAVEL AGENCY
Balance Sheet
December 31, 2014
Assets Liabilities
Cash $210,000 Accounts payable $115,000
Accounts receivable 370,000
Supplies 20,000
Land 300,000 Owner’s Equity
Sung Kim, capital 785,000
Total liabilities and
Total assets $900,000 owner’s equity $900,000


4. Sung Kim, Capital of $785,000