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Lakeview Sales and Service Comprehensive accounting cycle

The following trial balance was prepared for Lakeview Sales and Service on December 31, 2006, after the closing entries were posted.

Account Title Debit Credit
Cash 87,100
Accounts Receivable 18,760
Allowance for Doubtful Accts 960
Inventory 94,600
Accounts Payable 44,000
Common Stock 90,000
Retained Earnings 65,500

Totals 200,460 200,460

Lakeview had the following transactions in 2007:

1. Purchased merchandise on account for $270,000
2. Sold merchandise that cost $215,000 on account for $350,000
3. Performed $80,000 of service for cash
4. Sold merchandise for $76,000 to credit card customers. The merchandise cost $47,500. The credit card company charges a 5 percent fee
5. Collected $260,000 cash from accounts receivable
6. Paid $274,000 cash on accounts payable
8. Collected cash for the full amount due from the credit card company (see item 4)
9. Loaned $60,000 to R. Shell. The note had an 8 percent interest rate and a one-year term to maturity
10. Wrote off $650 of accounts uncollectible
11. Made the following adjusting entries:
(a) Recorded three months' interest on the note at December 31, 2007 (see item 9)
(b) Estimated uncollectible accounts expense to be .5 percent of sales on account

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 2007.

Solution Summary

The solution explains how to record the given transactions and prepare the financial statements

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