1. Gibco Sports begins operations on January 1, 2019. During the year, the following transactions affect shareholders' equity. 

1. Gibco authorizes the issuance of 2 million common shares and 100,000 preferred shares, which pay a dividend of $2 per share. 

2. 450,000 common shares are issued for $15 a share. 

3. 10,000 preferred shares are issued for $20 per share. 

4. A 2:1 stock split is declared on common shares. 

5. The full annual dividend on the preferred shares is declared and paid.

 6. A dividend of $0.30 per share is declared on the common shares but is not yet paid. 

7. The dividends on the common shares are paid. 

8. A 15% stock dividend is declared on the common shares. On the date of declaration, the shares' market price was $18.00. It dropped to $16.50 on the date of record.

a. Write the journal entries for the above transactions. All entries are whole dollar amounts, unless otherwise indicated. If no entry, explain the reason.

b. Calculate Retained Earnings as of December 31, 2019. The company had net income of $3,000,000 in 2019.

2. The December 31, 2019, unadjusted trial balance of Linn Ltd contained the following balances:

Accounts receivable $200,000

Allowances for uncollectible accounts $12,000 CR

Credit sales in 2019 $700,000

Credit sales return in 2019 $100,000

In addition, the firm has given up trying to collect a $9,500 receivable from a customer who recently declared bankruptcy. Linn's management has not yet written off the amount but intends to do so before the books are closed for the year.

Required:

I. Assuming Linn uses the percentage of credit sales method for recording bad debt expense

a. Provide the entry for the write-off of the $9,500.

b. Provide the entry to record the bad debt expense for 2019. On average Linn has experienced a 4% rate of uncollectible accounts over the past 5 years.

c. What would be the final balances in accounts receivable and the allowance for uncollectible accounts (AFDA)?

d. At what value would net accounts receivable be shown on the balance sheet?

II. Assuming Linn uses the percentage of accounts receivable method for recording bad debt expense

a. Provide the entry to record the bad debt expense for 2019 assuming that after the firm recorded the $9,500 of write-offs, it determined that 18% of its remaining accounts receivable would be uncollectible under the aging method.

b. At what value would net accounts receivable be shown on the balance sheet?

Answer rating: 100% (QA)

Answer Explanation 1 a No Account Titles Debit Credit 1 No entry 2 Cash 6750000 Common stock 4500001... View the full answer