Accounting for notes receivable and uncollectible accounts using the percent of sales allo...

Accounting for notes receivable and uncollectible accounts using the percent of sales allowance method

The following transactions apply to Bialis Co. for 2012, its first year of operations.

1.Issued $100,000 of common stock for cash.

2.Provided $86,000 of services on account.

3.Collected $75,000 cash from accounts receivable.

4.Loaned $10,000 to Horne Co. on October 1, 2012. The note had a one-year term to maturity and an 8 percent interest rate.

5.Paid $32,000 of salaries expense for the year.

6.Paid a $2,000 dividend to the stockholders.

7.Recorded the accrued interest on December 31, 2012 (see item 4).

8.Uncollectible accounts expense is estimated to be 1 percent of service revenue on account.

Required

a. Show the effects of the above transactions in a horizontal statements model like the one shown below.

b. Prepare the income statement, balance sheet, and statement of cash flows for 2012.