Hawkeye Corporation's balance sheet at December 31, 2024, is presented as follow.

During 2025, the following transactions occurred.

1. On January 1 , Hawkeye issued 1,200 shares of \(\$ 40\) par, \(7 \%\) preferred stock for \(\$ 49,200\).

2. On January 1, Hawkeye also issued 900 shares of the \(\$ 10\) par value common stock for \(\$ 21,000\).

3. Hawkeye performed services for \(\$ 320,000\) on account.

4. On April 1, 2025, Hawkeye collected fees of \(\$ 36,000\) in advance for services to be performed from April 1, 2025, to March 31, 2026.

5. Hawkeye collected \(\$ 276,000\) from customers on account.

6. Hawkeye bought \(\$ 35,100\) of supplies on account.

7. Hawkeye paid \(\$ 32,200\) on accounts payable.

8. Hawkeye reacquired 400 shares of its common stock on June 1 for \(\$ 28\) per share.

9. Paid other operating expenses of \(\$ 188,200\).

10. On December 31, 2025, Hawkeye declared the annual cash dividend on preferred stock and a \(\$ 1.20\) per share dividend on the outstanding common stock, all payable on January 15, 2026.

11. An account receivable of \(\$ 1,700\) which originated in 2024 is written off as uncollectible.

Adjustment data:

1. A count of supplies indicates that \(\$ 5,900\) of supplies remain unused at year-end.

2. Recorded revenue from item 4 above.

3. The allowance for doubtful accounts should have a balance of \(\$ 3,500\) at year end.

4. Depreciation is recorded on the building on a straight-line basis based on a 30 -year life and a salvage value of \(\$ 10,000\).

5. The income tax rate is \(30 \%\). (Hint: Prepare the income statement up to income before taxes and multiply by \(30 \%\) to compute the amount.)

Instructions

(You may want to set up T-accounts to determine ending balances.)

a. Prepare journal entries for the transactions listed above and adjusting entries.

b. Prepare an adjusted trial balance at December 31, 2025.

c. Prepare an income statement and a retained earnings statement for the year ending December 31 , 2025, and a classified balance sheet as of December 31, 2025.

Transcribed Image Text:

Cash Accounts receivable Allowance for doubtful accounts Supplies Land Buildings Accumulated depreciation- buildings Hawkeye Corporation Balance Sheet December 31, 2024 $ 24,600 45,500 (1,500) 4,400 40,000 142,000 (22,000) $233,000 Accounts payable Common stock ($10 par) Retained earnings $ 25,600 80,000 127,400 $233,000