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

The following transactions apply to Bialis Co. for 2012, its first year of operations.

 1. Issued $100,000 of common stock for cash.

 2. Provided $86,000 of services on account.

 3. Collected $75,000 cash from accounts receivable.

4. Loaned $10,000 to Horne Co. on October 1, 2012. The note had a one-year term to maturity and an 8 percent interest rate.

5. Paid $32,000 of salaries expense for the year.

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

7. Recorded the accrued interest on December 31, 2012 (see item 4).

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


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 fl ows for 2012.

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