Question

The following transactions apply to Hooper Co. for Year 1, its first year of operations:

1. Issued $110,000 of common stock for cash.
2. Provided $90,000 of services on account.
3. Collected $76,000 cash from accounts receivable.
4. Loaned $13,000 to Mosby Co. on November 30, Year 1. The note had a one-year term to maturity and a 8 percent interest rate.
5. Paid $44,000 of salaries expense for the year.
6. Paid a $2,500 dividend to the stockholders.
7. Recorded the accrued interest on December 31, Year 1 (see item 4).
8. Estimated that 1 percent of service revenue will be uncollectible.

Required

1. Show the effects of these transactions in a horizontal statements model like the one shown below. (Do not round your intermediate calculation and round your final answer to the nearest whole dollar. Enter any decreases to account balances and cash outflows with a minus sign. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, and NC for net change in cash. If there is no effect on the Statement of Cash Flow, leave the cell blank. Not all cells will require entry.)
2. Prepare the income statement, balance sheet, and statement of cash flows for Year 1.

Answer 1

Requirement (a) Event No 1 2 Cash + Accounts Receivable $110,000 + + $ 90,000 $ 76,000 + $ (76,000) $(13,000) + $ (44,000) + $ (2,500) + + + $126,500 + + $ 14,000 Hooper Co Horizontal Statement Model Assets Cash Flow Statement Equity Income Statement Allowance for Doubtful accounts + Notes Receivable + Interest Receivable Common Stock + Retained Earnings Revenue Expenses = Net Income + + $ 110,000 + FA + + + $ 90,000 $90,000 = $ 90,000 NA + + + OA + $ 13,000 + + IA + + + $ (44,000) $44,000 = $ (44,000) OA + + + $ (2,500) FA + + + $ 87 + $ 87 $ 87 - $ 87 NA $ (900) + + + $ (900) $ 900 = $ (900) NA $ (900) + $ 13,000 + $ 87 = $ 110,000 + $ 42,687 $90,087 $44,900 = $ 45,187 4 5 6 7 8 - - Totals

Requirement (b) Hooper Co Income Statement For the Year Ended December 31, Year 1 Service Revenue $ 90,000 Operating Expenses Salaries Expense $44,000 Uncollectible account expense $ 900 Hooper Co Statement of Cash Flows For the Year Ended December 31, Year 1 Cash flows from operating activities Cash inflows From customers $ 76,000 For salaries $ (44,000) Total Operating Expense Net Operating Income Non Operating Items Interest Revenue $ 44,900 $ 45,100 $ 32,000 Net cash from operating activities Cash flows from investing activities Loaned to party $ (13,000) $ $ (13,000) Net Income $ 45,187 Net cash used investing activities Cash flows from financing activities Issue of Common Stock Payment of Dividend Net cash from financing activities Net Increase in cash and cash equivalents $ 110,000 $ (2,500) $ 107,500 $ 126,500 Hooper Co Balance Sheet As at December 31, Year 1 Assets Current Assets Cash $ 126,500 Accounts Receivable $ 14,000 Less : Allowance for doubtful accounts $ (900) $ 13,100 Notes Receivable $ 13,000 Interest Receivable $ 87 Note : Comment down for any issues Note : If there is any difference in line item names please comment I'll Help Total assets $152,687 Stockholders Equity Stockholders Equity Common Stock Retained Earnings $110,000 $ 42,687 Total Stockholders Equity $152,687