Accounting for notes receivable and uncollectible accounts using
the percent of sales allowance method. The following transactions
apply to Hooper Co. for 2018, its first year of operations:
1. Issued $60,000 of common stock for cash.
2. Provided $90,000 of services on account.
3. Collected $78,000 cash from accounts
receivable.
4. Loaned $20,000 to Mosby Co. on November 30,
2018. The note had a one-year term to maturity and a 6 percent
interest rate.
5. Paid $26,000 of salaries expense for the
year.
6. Paid a $2,000 dividend to the
stockholders.
7. Recorded the accrued interest on December 31,
2018 (see item 4).
8. Estimated that 1 percent of service revenue
will be uncollectible.
Required
a. Show the effects of these transactions in a
horizontal statements model like the one shown as follows.
b. Prepare the horizontale statement model, and
statement of cash flows for 2018.
Please format answers similar to below
*PLEASE INCLUDE STATEMENT OF CASH FLOW*
Please also fill out the above math problems for both even 7 and 8
Homework Answers
Solution a:
|
Event |
Asset |
= |
Equity |
Rev. |
- |
Exp. |
= |
Net Inc. |
Cash Flows |
||||||
|
Cash |
Accounts receivable |
Allowance for doubtful debts |
Notes Rec. |
Int. rec. |
= |
Com. Stk. |
Ret. Earn. |
||||||||
|
1. |
60,000 |
NA |
NA |
NA |
NA |
= |
60,000 |
NA |
NA |
- |
NA |
NA |
60,000 Financing Activity |
||
|
2. |
NA |
90,000 |
NA |
NA |
NA |
= |
NA |
90,000 |
90,000 |
- |
NA |
= |
90,000 |
NA (As no cash flow has taken place) |
|
|
3. |
78,000 |
(78,000) |
NA |
NA |
NA |
= |
NA |
NA |
NA |
- |
NA |
= |
NA |
78,000 Operating Activity |
|
|
4. |
(20,000) |
NA |
NA |
20,000 |
NA |
= |
NA |
NA |
NA |
- |
NA |
= |
NA |
(20,000) Investing Activity |
|
|
5. |
(26,000) |
NA |
NA |
NA |
NA |
= |
NA |
(26,000) |
NA |
- |
26,000 |
= |
(26,000) |
(26,000) Operating Activity |
|
|
6. |
(2,000) |
NA |
NA |
NA |
NA |
= |
NA |
(2,000) |
NA |
- |
NA |
= |
NA |
(2,000) Financing Activity |
|
|
7.(WN1) |
NA |
NA |
NA |
NA |
100 |
= |
NA |
100 |
100 |
- |
NA |
= |
100 |
NA (As no cash flow has taken place) |
|
|
8.(WN2) |
NA |
NA |
(900) |
NA |
NA |
= |
NA |
(900) |
NA |
- |
900 |
= |
(900) |
NA (As no cash flow has taken place) |
|
|
Total |
90,000 |
12,000 |
(900) |
20,000 |
100 |
= |
60,000 |
61,200 |
90,100 |
- |
26,900 |
= |
63,200 |
||
Working Note (WN):
(1) $ 20,000 X 6 % X 1/12 = $ 100
(2) $ 90,000 X 1% = $ 900
Solution b:
Hooper Co. Horizontal Statements Model
|
Balance Sheet |
Income Statement |
Statement of Cash Flows |
|||||||||||||
|
Event |
Asset |
= |
Equity |
Rev. |
- |
Exp. |
= |
Net Inc. |
Cash Flows |
||||||
|
Cash |
Accounts receivable |
Allowance for doubtful debts |
Notes Rec. |
Int. rec. |
= |
Com. Stk. |
Ret. Earn. |
||||||||
|
1. |
60,000 |
NA |
NA |
NA |
NA |
= |
60,000 |
NA |
NA |
- |
NA |
NA |
60,000 Financing Activity |
||
|
2. |
NA |
90,000 |
NA |
NA |
NA |
= |
NA |
90,000 |
90,000 |
- |
NA |
= |
90,000 |
NA (As no cash flow has taken place) |
|
|
3. |
78,000 |
(78,000) |
NA |
NA |
NA |
= |
NA |
NA |
NA |
- |
NA |
= |
NA |
78,000 Operating Activity |
|
|
4. |
(20,000) |
NA |
NA |
20,000 |
NA |
= |
NA |
NA |
NA |
- |
NA |
= |
NA |
(20,000) Investing Activity |
|
|
5. |
(26,000) |
NA |
NA |
NA |
NA |
= |
NA |
(26,000) |
NA |
- |
26,000 |
= |
(26,000) |
(26,000) Operating Activity |
|
|
6. |
(2,000) |
NA |
NA |
NA |
NA |
= |
NA |
(2,000) |
NA |
- |
NA |
= |
NA |
(2,000) Financing Activity |
|
|
7.(WN1) |
NA |
NA |
NA |
NA |
100 |
= |
NA |
100 |
100 |
- |
NA |
= |
100 |
NA (As no cash flow has taken place) |
|
|
8.(WN2) |
NA |
NA |
(900) |
NA |
NA |
= |
NA |
(900) |
NA |
- |
900 |
= |
(900) |
NA (As no cash flow has taken place) |
|
|
Total |
90,000 |
12,000 |
(900) |
20,000 |
100 |
= |
60,000 |
61,200 |
90,100 |
- |
26,900 |
= |
63,200 |
||
Working Note (WN):
(1) $ 20,000 X 6 % = $ 1,200; $ 1,200 X 1/12 = $ 100
(2) $ 90,000 X 1% = $ 900
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