Today is December 31, 2018. Today, we started the Hilo Tourism 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 an Income Statement for the year ending, December 31, 2019.
Today is December 31, 2018. Today, we started the Hilo Tourism 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 an Income Statement for the year ending, December 31, 2019.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:**Hilo Tourism Company Financial Overview:**
*Date Context: December 31, 2018*
The Hilo Tourism Company was launched to cater to tourism services for customers traveling from Hilo dock to the Volcano. The company's initial capital investment includes $25,000 from the owners and an additional $15,000 loan at a 10% simple interest rate. From this, $10,000 is allocated for operating cash, and $30,000 for a tourism van purchase.
### Revenue and Contract:
- **Service Contract:** The company has secured a deal with Royal Cruise Line, generating $160,000 in cash sales for 2019.
### Expenses:
- **Van Depreciation:** $5,000 annually.
- **Insurance:** $12,000 annually.
- **Driver Salaries:** $20,000 annually.
- **Tour Guide Salaries:** $16,000 annually.
- **Fuel and Repairs:** $40,000 annually.
### Tax and Income Distribution:
- The business is in a 10% tax bracket.
- Net income for 2019 is equally divided: Half paid as dividends to owners, half retained within the company.
### Task:
Prepare an Income Statement for the year ending December 31, 2019, based on the given financial data.
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