accounting for notes receivable and uncollectible accounts using the percent of sale 650294

Accounting for notes receivable and uncollectible accounts using the percent of sales allowance method

The following transactions apply to Baker Co. for 2010, its first year of operations.

1. Issued $60,000 of common stock for cash.

2. Provided $128,000 of services on account.

3. Collected $113,200 cash from accounts receivable.

4. Loaned $12,000 to BBC on September 1, 2010. The note had a one year term to maturity and an 8 percent interest rate.

5. Paid $28,000 of salaries expense for the year.

6. Paid a $2,000 dividend to the stockholders.

7. Recorded the accrued interest on December 31, 2010 (see item 4).

8. Uncollectible accounts expense is estimated to be 1 percent of sales on account.

Required

a. Show the effects of the above transactions in a horizontal statements model like the one shown below.

b. Prepare the income statement, balance sheet, and statement of cash flows for 2010.