Question

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 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

Answer 1

        Statement of retained earnings

                 31 December 2019                               

	Revenue	160000
Less	Fuel & repairs	(40000)
Less	Driver salary	(20000)
Less	Tour guide	(16000)
Less	Insurance of vehicle	(12000)
Less	Depreciation	(5000)
Less	Interest on loan	(1500)
	Income before tax	65500
Less	Tax @10%	6550
	Net income after tax	58950
Less	Devidend paid	29475
	Retained earnings	29475

Interest = 15000*10/100 = 1500