Problem 5-26 Accounting for notes receivable and uncollectible accounts using th
ID: 2526795 • Letter: P
Question
Problem 5-26 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 common stock for cash. (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 $23,000 of salaries expense for the year. (6). Paid a $2,000 dividend to the stockholders. (7). Recorded the accrued interest on December 30, 2018 (see item 4). (8). Estimated that 1 percent of service revenue will be uncollectible.
a. Show the effects of these transactions in a horizontal statements model like the one shown as follows
Assets Equity Rev. - Exp. = Net Inc. Cash Flows
Event: Cash +Accts. Rec. + Notes Rec. + Int. Rec. = Com. Stk. + Ret.Earn.
- Allow. for Doubtful.
(b). Prepare the income statement, balance sheet, and statement of cash flows for 2018
Problem 7-29 Current Liabilities, The following selected transactions were taken from the books of Ripley Company for 2018. (1). On February 1, 2018, borrowed $70,000 cash from the local bank. The note had a 6 percent interest rate and was due on June 1, 2018. (2). Cash sales for the year amounted to $240,000 plus sales tax at the rate of 7 percent. (3). Pipley provided a 90-day warranty on the merchandise sold. The warranty expense is estimated to be 1 percent of sales.( 4). Paid the sales tax to the state sales agency on $210,000 of the sales.( 5) Paid the note due on June 1 and the related interest. (6). On November 1, 2018, borrowed $20,000 cash from the local bank. The note had a 6 percent interest rate and a one-year term to maturity. (7). Paid $2,100 for warranty repairs (8). A customer has filed a lawsuit against Ripley for $1 million for breach of contract. The company attorney does not believe the suit has merit. Questions a. (1) What is the amount of cash did Ripley pay for interest during 2018? (2) What amount of interest expense is reported on Ripley's income statement for 2018? (3) What is the amount of warranty expense for 2018? (b). Prepare the current liabilities section of the balance sheet at December 31, 2018.
(c). Show the effect of these transactions on the financial statements using a horizontal statements model like the one below. Use + for the increase, - for the decrease, and NA for not affected. In the Cash Flows column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA).The first transaction has been recorded as an example.
Assets = Liabilities + Equity Rev. - Exp. = Net Inc. Cash Flow
+ + NA NA NA NA + FA
Problem 6-22, Accounting for the acquisition of assets, including a basket purchase. Trinkle Company made several purchases of long-term assets in 2018. The details of each purchase are presented here: Basket purchase of Copier, Computer, and Scanner for $30,000 with Fair Market Values. 1. Copiers, $22,000 2. Computer, $10,000 3. Scanner, $8,000 Question. Allocation is based on relative market values Then, 6-23 Calculating depreciation expense using three different methods. Banko Inc. manufactures sporting goods. The following information applies to a machine purchased on January 1, 2018. Purchase price $70,000 Delivery cost $3,000 Installation charge $1,000 Estimated life 5 years Estimated units 140,000 Salvage estimate $4,000. During 2018, the machine produced 36,000 units and during 2019, it produced 38,000 units. Determine the amount of depreciation expense for 2018 and 2019 using each of the following methods. Questions: (a). Straight - line b. Double - declining - balance. c. Units of productions Check figures: (b). Depreciation Expense, 1018, $29,600 c. Depreciation Expense, 2019, $19,000.
Explanation / Answer
Dear student I have done the first question
ans a Event Cash Acc rec-Allow for doubtful debts Notes Rec Int rec Common stock Ret. Earning Rev- Exp Net Inc Cash flows 1 $60,000 60000 FA 2 90000 90000 90000 90000 No effect 3 78000 -78000 OA 4 -20000 20000 IA 5 -26000 -26000 26000 -26000 OA 6 -2000 -2000 FA 7 100 100 100 100 No effect (20000*6%*1/12) 8 -900 -900 900 -900 No effect Total $90,000 $11,100 $20,000 $100 $60,000 $61,200 $90,100 $26,900 $63,200 ans b Income Statement Service Revenue $90,000 Less: Expenses Salaries expenses 26000 Bad Debt expenses 900 26900 Operating Income $63,100 Add: interest revenue 100 Net Income $63,000 Balance Sheet Assets Current Assets Cash $90,000 Accounts Receivable 12000 Less: Allow for Doubtful Debts 900 11100 Notes Receivable $20,000 Interest Receivable 100 Total Assets $121,200 Stockholder Equity Common stock $60,000 Retained Earning $61,200 Total stockholder equity $121,200 Statement of cash flow Cash flows from operating activities Cash inflows From customers 78000 For salaries -26000 Net cash from operating activities 52,000.00 Cash flows from investing activities Loaned to party ($20,000) -20000 Net cash used investing activities (20,000.00) Cash flows from financing activities Sale of common stock 60000 Payment of Dividend -2000 58,000.00 Net cash from financing activities 58,000.00 Net Increase in cash and cash equivalents 90,000.00