Air and Sea Travel Case Study

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 xpense |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? ASSETSLIABILITIES 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 1. |Air & Sea Travel Inc. | |Income Statement | |April 30, 20X6 | |Revenues |8,500 | |Expenses |2,700 | |Rent expense 1,100 | |Salary expense |1200 | |Utilities expense |400 | |Net income |5,800 | |Air & Sea Travel Inc. | |Statement of Retained Earnings | |April 30, 20X6 | | | | |Beginning of Retained Earnings |0 | |Net income |5,800 | |Cash dividends |(2,100) | |Ending Retained Earnings |3,700 | |Air & Sea Travel Inc. |Balance Sheet | |April 30, 20X6 | | | | |Assets | | |Cash |33,300 | |All other assets |20,500 | |Land |18,000 | |Office supplies |500 | |Account receivable |2,000 | |Total assets |53,800 | |Liabilities | | |Acount Payable |100 | |Total liabilities |100 | |Stockholder’s equity | | |Common stock |50,000 | |Retained earnings |3,700 | |All other equity |0 | |Total liabilities and stockholder’s equity |53,800 | |Air & Sea Travel Inc. |Statement of Cash Flows | |April 30, 20X6 | |Net cash provided by operating activities | |3,400 | |Net income |5,800 | | |Adjustments to reconcile net income to net cash provided by operating activities |(2,400) | | |Net cash used for investing activities | |(18,000) | | Sale of land |22,000 | | |Acquisition of land |(40,000) | | |Net cash provided by financing activities | |47,900 | |Issuance stock |50,000 | | |Dividends |(2,100) | | |Net change in cash | | 33,300 | |Beginning cash balance | |0 | |Ending cash balance | | 33,300 | 2. a) They performed very well, since they got profit in the end of the month. They do not pay too much salary and they don’t have too many depts. To be a financially well-managed company, it must generate profit, meaning there is more money coming in than going out. This looks to be well managed company since there is a lot of profit in the end of the month. Income Statement, Statement of Retained Earnings, Balance Sheet and Statement of Cash Flows are all on the plus side. Nothing seems to be out of order. b) They have 33,300 retained earnings at the end of April, which means a good profit.

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