Problem 7-21B: Multistep Income Statement and Balance Sheet

Accounting for Receivables

Problem 7-21B: Multistep Income Statement and Balance Sheet

Required:

Use the following information to prepare a multistep income statement and a balance sheet for Trias Company for Year 2.
(Hint: Some of the items will not appear on either statement, and ending retained earnings must be calculated.)

Operating Expenses: $45,000
Accounts Payable: $48,000
Land: $45,000
Dividends: $10,000
Beginning Retained Earnings: $120,100
Interest Revenue: $12,000
Inventory: $105,000
Notes Receivable (short term): $15,000
Cash: $16,700
Interest Receivable (short term): $2,100
Cash Flow from Investing Activities: ($91,600)
Allowance for Doubtful Accounts: $6,500
Sales Revenue: $350,000
Uncollectible Accounts Expense: $9,600
Accounts Receivable: $92,000
Salaries Payable: $10,500
Supplies: $4,500
Prepaid Rent: $16,000
Common Stock: $60,000
Cost of Goods Sold: $225,000
Salaries Expense: $61,200
Unearned Revenue: $40,000

Problem 7-22B: Accounting for Notes Receivable and Uncollectible Accounts Using the Direct Write-Off Method

The following transactions apply to Cheng Co. for Year 1, its first year of operations:

1. Issued $60,000 of common stock for cash.
2. Provided $94,000 of services on account.
3. Collected $84,500 cash from accounts receivable.
4. Loaned $10,000 to Swan Co. on October 1, Year 1. The note had a one-year term to maturity and a 6 percent interest rate.
5. Paid $41,000 of salaries expense for the year.
6. Paid a $3,000 dividend to the stockholders.
7. Recorded the accrued interest on December 31, Year 1 (see item 4).
8. Determined that $990 of accounts receivable were uncollectible. The company uses the direct write-off method.

Required:

a. Record the above transactions in general journal form.
b. Post the entries to T-accounts.
c. Prepare the income statement, balance sheet, and statement of cash flows for Year 1.
d. Show the effects of the above transactions in a horizontal statements model like the one shown next.