Question

Sage Inc. experienced the following transactions for 2018, its first year of operations:

1. Issued common stock for $110,000 cash.
2. Purchased $205,000 of merchandise on account.
3. Sold merchandise that cost $164,000 for $326,000 on account.
4. Collected $292,000 cash from accounts receivable.
5. Paid $185,000 on accounts payable.
6. Paid $54,000 of salaries expense for the year.
7. Paid other operating expenses of $70,000.
8. Sage adjusted the accounts using the following information from an accounts receivable aging schedule:

Number of Days Past Due	Amount			Percent Likely to Be Uncollectible	Allowance Balance
Current	$	20,400		0.01
0–30		8,500		0.05
31–60		1,700		0.10
61–90		1,700		0.20
Over 90 days		1,700		0.50

b. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Sage Inc. for 2018.

SAGE INC.
Balance Sheet
As of the End of the Year 2018
Assets
not attempted		not attempted
not attempted	not attempted
not attempted	not attempted	0
not attempted		not attempted
Total assets		$0
Liabilities
not attempted	not attempted
not attempted	not attempted
Total liabilities		0
Stockholders’ equity
not attempted	not attempted
not attempted	not attempted
not attempted	not attempted
Total stockholders’ equity		0
Total liabilities and stockholders’ equity		$0

SAGE INC.
Statement of Cash Flows
For the Year Ended 2018
Cash flows from operating activities:
not attempted	not attempted
not attempted	not attempted
not attempted	not attempted
not attempted	not attempted
Net cash flow from operating activities		$0
Cash flows from investing activities		not attempted
Cash flows from financing activities
not attempted	not attempted
not attempted	not attempted
Net cash flows from financing activities		0
Net change in cash		0
not attempted		not attempted
Ending cash balance		$0

3. What is the net realizable value of the accounts receivable at December 31, 2018?

Net realizable value

Answer 1

	a.)	Number of Days Past Due	Amount $	Percent Likely to Be Uncollectible	Allowance Balance $
		Current	20,400	0.01	204
		0–30	8,500	0.05	425
		31–60	1,700	0.1	170
		61–90	1,700	0.2	340
		Over 90 days	1,700	0.5	850
		Total	34,000		1,989
	b.)	SAGE INC.
		Income Statement	Amount $
		Sales	326,000
		Less: Cost of goods sold	164,000
		Gross Profit	162,000
		Less: Salaries Expense	54,000
		Less: Bad Debt Expense	1,989
		Less: Other operating expenses	70,000
		Net Profit	36,011
		SAGE INC.
		Statement of Change in Stockholders' Equity
			Common Stock	Retained earnings	Total $
		On January 1,2018	-	-	-
		Add: Net Profit	-	36,011	36,011
		Add: Issued during 2018	110,000	-	110,000
		On December 31,2018	110,000	36,011	146,011
		SAGE INC.
		Balance Sheet
		As of the End of the Year 2018	Amount $
		Assets
		Cash( 110,000 + 292,000 - 185,000 - 54,000 - 70,000 )	93,000
		Accounts Receivable (net of allowance )	32,011
		(326,000 - 292,000 - 1,989 )
		Merchandise Inventory (205,000 - 164,000 )	41,000
		Total assets	166,011
		Liabilities
		Accounts Payable	20,000
		(205,000 - 185,000 )
		Total liabilities	20,000
		Stockholders’ equity
		Common Stock	110,000
		Retained earnings	36,011
		Total stockholders’ equity	146,011
		Total liabilities and stockholders’ equity	166,011
		SAGE INC.
		Statement of Cash Flows
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