Question

Problem 5-2 25 points The following transactions apply to Amarillo Co. for 2018, its first year of operations. 1 Issued $780,000 of common stock for cash. 2 Loaned $81,250 to Falls Co. on September 1, 2018. The note had a one-year term to maturity and an 5% interest rate. All monies will be collected on Aug 31 2019 3 Recorded the accrued interest income on December 31, 2018 (see item 2). 4 Provided $637,000 of services on account. 5 Paid $240,500 of salaries expense for the year. 6 Uncollectible accounts expense is estimated to be 3.0% of service revenue on account. 7 Collected $500,500 cash from accounts receivable. 8 Paid a $18,200 dividend to the stockholders. REQUIRED a. Show the effects of the above transactions in a horizontal statements model. b. Prepare the income statement, balance sheet, and statement of cash flows for 2018. Make sure to include the interest impact on a separate line on the income statement for full credit.

          Problem 5-2
25 points
The following transactions apply to Amarillo Co. for 2018, its first year of operations.
1 Issued
$780,000 of common stock for cash.
2 Loaned
$81,250 to Falls Co. on September 1, 2018. The note had a one-year term to maturity
and an 5% interest rate. All monies will be collected on Aug 31 2019
3 Recorded the accrued interest income on December 31, 2018 (see item 2).
4 Provided
$637,000 of services on account.
5 Paid
$240,500 of salaries expense for the year.
6 Uncollectible accounts expense is estimated to be
3.0%
of service revenue on account.
7 Collected
$500,500 cash from accounts receivable.
8 Paid a
$18,200 dividend to the stockholders.
REQUIRED
a. Show the effects of the above transactions in a horizontal statements model.
b. Prepare the income statement, balance sheet, and statement of cash flows for 2018.
Make sure to include the interest impact on a separate line on the income statement for full credit.

Problem 5-2
25 points
The following transactions apply to Amarillo Co. for 2018, its first year of operations.
1 Issued
780,000 of common stock for cash.
2 Loaned81,250 to Falls Co. on September 1, 2018. The note had a one-year term to maturity
and an 5% interest rate. All monies will be collected on Aug 31 2019
3 Recorded the accrued interest income on December 31, 2018 (see item 2).
4 Provided
637,000 of services on account.
5 Paid240,500 of salaries expense for the year.
6 Uncollectible accounts expense is estimated to be
3.0%
of service revenue on account.
7 Collected
500,500 cash from accounts receivable.
8 Paid a18,200 dividend to the stockholders.
REQUIRED
a. Show the effects of the above transactions in a horizontal statements model.
b. Prepare the income statement, balance sheet, and statement of cash flows for 2018.
Make sure to include the interest impact on a separate line on the income statement for full credit.

Added by Bonnie L.

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