Question

Hudson Corporation’s balance sheet at December 31, 2016, is presented below.

Hudson Corporation
Balance Sheet
December 31, 201

Hudson Corporation Balance Sheet December 31, 2016

Cash $ 13,100	Accounts payable $ 8,750
Accounts receivable 19,780	Common stock 20,000
Allowance for doubtful accounts ( 800 )	Retained earnings 12,730
Inventory 9,400
$ 41,480	$ 41,480

During January 2016, the following transactions occurred. Hudson Corporation uses the perpetual inventory method.

Jan. 1 Hudson Corporation accepted a 4-month, 8% note from Betheny Company in payment of Betheny’s $ 1,200 account.

Jan 3 Hudson Corporation wrote off as uncollectible the accounts of Walter Corporation ($ 450) and Drake Company ($ 280).

Jan 8 Hudson Corporation purchased $ 17,200 of inventory on account.

Jan 11 Hudson Corporation sold for $ 25,000 on account inventory that cost $ 17,500.

Jan 15 Hudson Corporation sold inventory that cost $ 700 to Jack Rice for $ 1,000. Rice charged this amount on his Visa First Bank card. The service fee charged Hudson Corporation by First Bank is 3%.

Jan 17 Hudson Corporation collected $ 22,900 from customers on account.

Jan 21 Hudson Corporation paid $ 16,300 on accounts payable.

Jan 24 Hudson Corporation received payment in full ($ 280) from Drake Company on the account written off on January 3.

Jan 27 Hudson Corporation purchased advertising supplies for $ 1,400 cash.

Jan 31 Hudson Corporation paid other operating expenses, $ 3,218.

Adjustment data:

1. Interest is recorded for the month on the note from January 1.

2. Bad debts are expected to be 6% of the January 31, 2017, accounts receivable.

3. A count of advertising supplies on January 31, 2017, reveals that $ 560 remains unused.

4. The income tax rate is 30%. (Hint: Prepare the income statement up to “Income before taxes” and multiply by 30% to compute the amount; round to whole dollars.)

Prepare an income statement

Answer 1