THE INFORMATION FOR PROBLEMS 17-20 ARE THE SAME. HOWEVER, EACH QUESTIONS ASKS YOU TO DO SOMETIHNG ELSE WITH THE INFORMATION. Today is December 31, 2018. Today, we started the Hilo Tourişm Company. To start the business, the owners have invested $25,000 into the business from their own pocket. In addition, the company borrowed $15,000 at a 10 percent simple interest rate. Thus, the company has $40,000 to work with. The company will use $10,000 of this money for operating cash. The company will use the remaining money to purchase a tourism van for $30,000 on December 31st. The company will pay interest only on the loan. The Hilo Tourism Company will contract our services to Royal Cruise Line who has agreed to pay us $160,000 in the year 2019 for providing tours to high-class customers from the Hilo dock to the Volcano. All sales are cash sales. Hilo Tourism Company will have the following expenses in the year 2019. The van will wear out by $5,000 per year. Insurance will cost $12,000 per year. It will cost $20,000 per year for the driver and $16,000 per year for the tour guide. Fuel and repairs combined will cost $40,000 per year. All operating expenses, except depreciation, are cash operating expenses. The company is in a 10 percent tax bracket. One half of the firm's 2019 net income will be paid out to the owners as a dividend and the other half of the firm's net income will be retained within the firm. Create a Statement of Retained Earnings for the year ending, December 31, 2019. CREATE ONLY A STATEMENT OF RETAINED EARNINGS TO ANSWER THIS QUESTION. I WILL ASK YOU TO PRODUCE ADDITIONAL STATEMENTS IN OTHER QUESTIONS.
THE INFORMATION FOR PROBLEMS 17-20 ARE THE SAME. HOWEVER, EACH QUESTIONS ASKS YOU TO DO SOMETIHNG ELSE WITH THE INFORMATION. Today is December 31, 2018. Today, we started the Hilo Tourişm Company. To start the business, the owners have invested $25,000 into the business from their own pocket. In addition, the company borrowed $15,000 at a 10 percent simple interest rate. Thus, the company has $40,000 to work with. The company will use $10,000 of this money for operating cash. The company will use the remaining money to purchase a tourism van for $30,000 on December 31st. The company will pay interest only on the loan. The Hilo Tourism Company will contract our services to Royal Cruise Line who has agreed to pay us $160,000 in the year 2019 for providing tours to high-class customers from the Hilo dock to the Volcano. All sales are cash sales. Hilo Tourism Company will have the following expenses in the year 2019. The van will wear out by $5,000 per year. Insurance will cost $12,000 per year. It will cost $20,000 per year for the driver and $16,000 per year for the tour guide. Fuel and repairs combined will cost $40,000 per year. All operating expenses, except depreciation, are cash operating expenses. The company is in a 10 percent tax bracket. One half of the firm's 2019 net income will be paid out to the owners as a dividend and the other half of the firm's net income will be retained within the firm. Create a Statement of Retained Earnings for the year ending, December 31, 2019. CREATE ONLY A STATEMENT OF RETAINED EARNINGS TO ANSWER THIS QUESTION. I WILL ASK YOU TO PRODUCE ADDITIONAL STATEMENTS IN OTHER QUESTIONS.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:**The Information for Problems 17-20**
The same information applies to problems 17-20. However, each question requires you to do something different with the information.
**Business Context:**
- **Date:** December 31, 2018
- **Business Name:** Hilo Tourism Company
**Initial Investment and Funding:**
- Owners’ Investment: $25,000
- Loan: $15,000 at 10% simple interest
**Fund Allocation:**
- Operating Cash: $10,000
- Purchase of a Tourism Van: $30,000 on December 31st
**Business Operations:**
- **Service Contract:** Royal Cruise Line will pay the company $160,000 in 2019 for tours from the Hilo dock to the Volcano.
- **Sales:** All sales are cash sales.
**Annual Expenses:**
- Depreciation on Van: $5,000
- Insurance: $12,000
- Wages for Driver: $20,000
- Fuel and Repairs: $16,000
- Other Operating Expenses: $40,000
**Tax and Income:**
- Tax Bracket: 10%
- Dividend: 50% of 2019 net income paid to owners
- Retained Earnings: 50% of 2019 net income retained in the firm
**Task:**
Create a Statement of Retained Earnings for the year ending December 31, 2019. Only create the Statement of Retained Earnings for this question. Further details will be requested in subsequent questions.
Expert Solution
Explanation -
1. Statement of Retained Earnings -
Statement of retained earnings is the accumulated profit retained by the organization. It increases when the company earned net income and decreases when the company incurred net loss and dividends.
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