Air and Sea Travel Case Study

Topics: Generally Accepted Accounting Principles, Balance sheet, Revenue Pages: 5 (644 words) Published: December 1, 2012
Air & Sea Travel Inc. Case study

Air & Sea Travel Inc. a travel agency began operations on April 1, 20X6. During April, the business provided travel services for clients. It is now April 30, and investors wonder how well Air & Sea Travel performed during its first month. They also want to know the company’s financial position at the end of April and its cash flows during the month.

The following data is listed in alphabetical order. Prepare the Air & Sea Travel financial statements at end of April 20X6.

|Accounts payable |$100 |Land |$18,000 | |Accounts receivable |2,000 |Office supplies |500 | |Adjustments to reconcile net | |Payments of cash: | | | income to net cash provided | | Acquisition of land |40,000 | | by operating activities |(2,400) | Dividends |2,100 | |Cash balance at the beginning of April |0 |Rent expense |1,100 | |Cash balance at the end of April |33,300 |Retained earnings at the beginning of April | | | | | |0 | |Cash receipts: | |Retained earnings at the end of April |? | | Issuance stock |50,000 |Salary expense | 1200 | | Sale of land |22,000 |Service revenue |8,500 | |Common stock |50,000 |Utilities expense |400 | |Dividends |2,100 | | |

1. Prepare the income statement, the statement of retained earnings, the statement of cash flows for the month ended April 30, 20X6, and the balance sheet at April 30, 20X6. 2. Answer the following questions:

a. How well did Air & Sea Travel perform during its first month of operations? b. Where does Air & Sea Travel stand financially at the end of April?

Cash33,300Account payable100
Account receivable2,000Land 18,000
Insurance stock50,000Office supplies500
Sale of land 22,000Payment of cash
Common stock50,000 Acquisition of land40,000
Dividends2,100 Dividends2,100
Service revenue8,500Rent expense1,100
Salary expense1,200
Utilities expense400
Adjustment to reconcile 2,400
net income to net cash
provided by operating activities

|Air & Sea Travel Inc. | |Income Statement | |April 30, 20X6 | |Revenues |8,500 | |Expenses |2,700 | |Rent expense...
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