Problem 5-26

Accounting GBA 5205

Survey of Accounting, fifth edition by edmonds (ISBN: 9781307078473)

LO 5-1, 5-4 Accounting for notes receivable and uncollectible accounts using the percent of sales allowance method Problem 5-26 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. Assets Equity Rev. Exp.Net Inc. Cash Flows Event CashAccts. Rec. Notes Rec.Int. Rec.Com. Stk. + Ret. Earn. -Allow. for Doubtful Accts. b. Prepare the income statement, balance sheet, and statement of cash flows for 2018