Account Balances and Supplemental Information for the Alain Corporation as of December

question 5

Essay

Account balances and supplemental information for the Alain Corporation as of December 31,2015,are given below:

(a)$300,000 of 12% bonds were sold on November 1,2015,at par.
(b)40,000 shares of $30 par value common stock were sold for $1,560,000.
(c)All the equipment was purchased on January 2,2014.The depreciation rate is 10 percent per year.
(d)5 percent of accounts receivable are expected to be uncollectible.
(e)A two-year insurance policy was purchased on May 1,2015,for $7,200.
(f)Accrued interest on $150,000 of short-term notes receivable from customers was $5,100 at December 31,2015.
(g)$120,000 was borrowed from the bank on a 5-year,10% note payable dated July 1,2015.The loan is to be repaid in 10 semiannual payments of $12,000 plus interest,with the first payment due January 1,2016.
Prepare a properly classified balance sheet in report form for Alain Corporation as of December 31,2015.

---

Definitions:

Accruals

Accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when the cash transaction happens.

Financing

The act of providing funds for business activities, making purchases, or investing, including means such as loans, equity investments, and other financial instruments.

Compensating Balance

A portion of a loan that banks require borrowers to leave in their checking accounts. Effectively increases the bank’s yield. A minimum balance required to compensate banks for their services.

Checking Account

A bank account that allows depositors to write checks against deposited funds, making it easy to access and manage money for daily transactions.