Question

The financial statements at the end of Paradise Realty's first month of operations are shown bel PARADISE REALTY Income Statement For the Month Ended November 30, 20Y3 Fees earned $375,000 Operating expenses: Wages expense Rent expense Supplies expense Utilities expense Miscellaneous expense s (a) 67,500 57,375 47,250 16,875 Total operating expenses (271,500) Net income $ (b)

Answer 1

1)Realty Business is a service business because under a real estate business brokers, agents, managers render services for the purchase, sale, leasing or managing of real estate.They charge fees for services rendered.

2 a) Wages Expense = Total Operating Expense -(Rent+supplies+Utilities+Miscellaneous Expenses)

= $271,500-($67,500+$57,375+$47,250+$16,875)

= $82,500

b) Net Income = Total Fees Earned - Total Operating Expense

= $375,000- $271,500 = $103,500

c) Net Income for November = $103,500

d) Dividends = (Issue of Common Stock +Net Income for November) - Stockholders' Equity balances on 30 November 20Y3

= ($254,000+$103,500) - $334,640 = $22,860

e) Retained Earnings,November 30,20Y3 = Net Income - Dividends

= $103,500 - $22,860

= $80,640

f) Land = Total Assets - (Cash + Supplies)

= Total Assets = Total Liabilities + Shareholders' Equity

Total Liabilities + Shareholders' Equity =  Note Payable + Balances of Shareholders' Equity on November 30,20Y3

= $159,291+ $334,640 = $493,931

So, Total Assets are also $493,931

Land = $493,931- ($193,975 + $77,456)= $222,500

g)Total Assets = Total Liabilities + Shareholders' Equity

Total Liabilities + Shareholders' Equity =  Note Payable + Balances of Shareholders' Equity on November 30, 20Y3

= $159,291+ $334,640 = $493,931

So, Total Assets are also $493,931

h) Common Stock = Issuance of Common Stock =$254,000

i) Retained Earnings = Net Income - Dividends

= $103,500 - $22,860 = $80,640

j)Total Shareholders' Equity = Common Stock + Retained Earnings

= $254,000 + $80,640 = $334,640

k)Total Liabilities and Shareholders' Equity =  Note Payable +Shareholder' Equity

=$159,291+ $334,640 = $493,931