In: Accounting
Web Wizard, Inc., has provided information technology services for several years. For the first two months of the current year, the company has used the percentage of credit sales method to estimate bad debts. At the end of the first quarter, the company switched to the aging of accounts receivable method. The company entered into the following partial list of transactions during the first quarter.
Number of Days Unpaid | ||||||||||||||||
Customer | Total | 0–30 | 31–60 | 61–90 | Over 90 | |||||||||||
Alabama Tourism | $ | 200 | $ | 100 | $ | 80 | $ | 20 | ||||||||
Bayside Bungalows | 400 | $ | 400 | |||||||||||||
Others (not shown to save space) | 17,000 | 6,800 | 8,400 | 1,000 | 800 | |||||||||||
Xciting Xcursions | 400 | 400 | ||||||||||||||
Total Accounts Receivable | $ | 18,000 | $ | 7,300 | $ | 8,480 | $ | 1,020 | $ | 1,200 | ||||||
Estimated Uncollectible (%) | 2 | % | 10 | % | 20 | % | 40 | % | ||||||||
Required:
For items (a)–(j), analyze the transaction to determine effects on specific financial statement accounts and the overall accounting equation. (Enter any decreases to Assets, Liabilities, or Stockholders Equity with a minus sign. Do not round intermediate calculations.)
Assets | = | Liabilities | + | Stockholders' equity | |||
a) | Accounts Receivables | $ 40,000.00 | Sales Revenue | $ 40,000.00 | |||
b) | Allowance for Doubtful Accounts | $ (400.00) | Bad debt Expense | $ (400.00) | |||
c) | Cash | $ 20,000.00 | |||||
Accounts Receivables | $ (20,000.00) | ||||||
d) | Allowance for Doubtful Accounts | $ 100.00 | |||||
Accounts Receivables | $ (100.00) | ||||||
e) | Accounts Receivables | $ 30,000.00 | Sales Revenue | $ 30,000.00 | |||
f) | Allowance for Doubtful Accounts | $ (300.00) | Bad debt Expense | $ (300.00) | |||
g) | Notes Receivables | $ 2,400.00 | |||||
Cash | $ (2,400.00) | ||||||
h) | Allowance for Doubtful Accounts | $ (100.00) | |||||
Cash | $ 100.00 | ||||||
Accounts Receivables | $ (100.00) | ||||||
Accounts Receivables | $ 100.00 | ||||||
i) | Interest Receivables (2400 x 6%X 1/12 | $ 12.00 | Interest revenue | $ 12.00 | |||
j) | Allowance for Doubtful Accounts | $ (478.00) | Bad debts expense | $ (478.00) | |||
($ 7,300 X 2% + $ 8,480 x 10% + $ 1,020 x 20% + $ 1,200 x 40%) - 1200 |