The following transactions apply to Puretz Consulting for 2010, the first year of operation

Problem 5-17 Accounting for uncollectible accounts-two cycles using the percent of revenue allowance method

The following transactions apply to Puretz Consulting for 2010, the first year of operation.

1. Recognized $75,000 of service revenue earned on account.
2. Collected $62,000 from accounts receivable.
3. Adjusted accounts to recognize uncollectible accounts expense. Puretz uses the allowance method of accounting for uncollectible accounts and estimates that uncollectible accounts expense will be 2 percent of sales on account.

The following transactions apply to Puretz Consulting for 2011.
1. Recognized $86,500 of service revenue on account.
2. Collected $85,000 from accounts receivable.
3. Determined that $1,120 of the accounts receivable were uncollectible and wrote them off.
4. Collected $500 of an account that had been previously written off.
5. Paid $52,600 cash for operating expenses.
6. Adjusted accounts to recognize uncollectible accounts expense for 2011. Puretz estimates that uncollectible accounts expense will be 1 percent of sales on account.

Required
Complete all the following requirements for 2010 and 2011. Complete all requirements for 2010 prior to beginning the requirements for 2011.
a. Identify the type of each transaction (asset source, asset use, asset exchange, or claims exchange).
b. Show the effect of each transaction on the elements of the financial statements, using a horizontal statements model like the one shown here. Use + for increase, - for decrease, and NA for not affected. Also, in the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The first transaction is entered as an example. (Hint: Closing entries do not affect the statements model.)
c. Organize the transaction data in accounts under an accounting equation.
d. Prepare the income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows.

Check:
c. Ending Accounts Receivable, 2010: $13,000
d. Net Income, 2011: $33,035

Click here for the solution: The following transactions apply to Puretz Consulting for 2010, the first year of operation

(Comprehensive Accounting Cycle Problem) The following trial balance was prepared for Gifts, Etc., Inc., on December 31, 2010, after the closing entries were posted

Problem 5-26 Comprehensive Accounting Cycle Problem (Uses Percent of Revenue Allowance Method)

The following trial balance was prepared for Gifts, Etc., Inc., on December 31, 2010, after the closing entries were posted.

AND SO ON

Required
a. Organize the transaction data in accounts under an accounting equation.
b. Prepare an income statement, a statement of changes in stockholders' equity, a balance sheet, and a statement of cash flows for 2011.

Check:
Net Income: $236,710
Total Assets: 1,142,950

Click here for the solution: (Comprehensive Accounting Cycle Problem) The following trial balance was prepared for Gifts, Etc., Inc., on December 31, 2010, after the closing entries were posted

Use the following information to prepare a multistep income statement and a classified balance sheet for Reza Equipment Co. for 2010

Problem 5-24 Multistep Income Statement and Balance Sheet

Use the following information to prepare a multistep income statement and a classified balance sheet for Reza Equipment Co. for 2010. (Hint: Some of the items will not appear on either
and ending retained earnings must be calculated.)

AND SO ON

Check:
Total Current Assets: $250,300
Total Current Liabilities: $109,600

Click here for the solution: Use the following information to prepare a multistep income statement and a classified balance sheet for Reza Equipment Co. for 2010

(Effect of a Line of Credit on Financial Statements) Hulse Company has a line of credit with Bay Bank

Problem 7-25 Effect of a Line of Credit on Financial Statements

Hulse Company has a line of credit with Bay Bank. Hulse can borrow up to $250,000 at any time over the course of the 2010 calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during 2010. Hulse agreed pay interest at an annual rate equal to 1 percent above the bank's prime rate. Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month.

AND SO ON

Hulse earned $22000 of cash revenue during 2010.

Required
a. Organize the information in accounts under an accounting equation.
b. Prepare an income statements, balance sheet, and statement of cash flows for 2010.
c. Write a memo discussing the advantanges to a business of arranging a line of credit.

Check:
b. Interest Expense: $5,650
Total Assets: $56,350

Click here for the solution: (Effect of a Line of Credit on Financial Statements) Hulse Company has a line of credit with Bay Bank

The stockholders’ equity section of the balance sheet for Atkins Company at December 31, 2011, is as follows

Problem 8-23 Analyzing the Stockholders’ Equity Section of the Balance Sheet

The stockholders’ equity section of the balance sheet for Atkins Company at December 31, 2011, is as follows:

AND SO ON

Note: The market value per share of the common stock is $25, and the market value per share of the preferred stock is $12.

Required

1. What is the par value per share of the preferred stock?
2. What is the dividend per share on the preferred stock?
3. What is the number of common stock shares outstanding?
4. What was the average issue price per share (price for which the stock was issued) of the common stock?
5. Explain the difference between the average issue price and the market price of the common stock.
6. If Atkins declared a 2-for-1 stock split on the common stock, how many shares would be outstanding after the split? What amount would be transferred from the retained earnings account because of the stock split? Theoretically, what would be the market price of the common stock immediately after the stock split?

Check:
a. Par Value per Share: $10
b. Dividend per Share $.60

Click here for the solution: The stockholders’ equity section of the balance sheet for Atkins Company at December 31, 2011, is as follows

Blackmon Manufacturing Company makes a product that it sells for $50 per unit

Problem 11-28 Determining the Break-even Point and Preparing a Contribution Margin Income Statement

Blackmon Manufacturing Company makes a product that it sells for $50 per unit. The company incurs variable manufacturing costs of $14 per unit. Variable selling expenses are $6 per unit, annual fixed manufacturing costs are $189,000, and fixed selling and administrative costs are $141,000 per year.

a. Determine the break even point in units and dollars
b. Confirm your results by preparing a contribution margin income statement for the break-even sales volume.

Check:
a. 11,000 units
Click here for the solution: Blackmon Manufacturing Company makes a product that it sells for $50 per unit

Awtrey Quilting Company makes blankets that it markets through a variety of department stores

Problem 13-23 Effect of Order Quantity on Special Order Decision

Awtrey Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Awtrey made 20,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here.

AND SO ON

Check:
a. Relevant Cost per Unit: $53

Click here for the solution: Awtrey Quilting Company makes blankets that it markets through a variety of department stores