Question

In: Accounting

Number of Days Unpaid   Customer Total 0-30 31-60 61-90 Over 90     Aerosmith $ 2,000 $ 1,000...

Number of Days Unpaid

  Customer Total 0-30 31-60 61-90 Over 90
    Aerosmith $ 2,000 $ 1,000 $ 1,000
    Biggie Small 2,000 $ 1,000 $ 1,000  
    Others (not shown to save space) 100,200 39,300 42,300 9,300 9,300  
    ZZ Top 7,300 7,300
  Total Accounts Receivable $ 111,500 $ 47,600 $ 43,300 $ 10,300   $ 10,300  
  Estimated uncollectible (%) 5% 15% 25% 40%

Elite Events Corporation has provided event planning services for several years. The company uses the percentage of credit sales method to estimate bad debts for internal monthly reporting purposes. At the end of each quarter, the company adjusts its records using the aging of accounts receivable method. The company entered into the following partial list of transactions during the first quarter.

a. During January, the company provided services for $330,000 on credit.
b. On January 31, the company estimated bad debts using 2 percent of credit sales.
c. On February 4, the company collected $280,000 of accounts receivable.
d. On February 15, the company wrote off a $3,300 account receivable.
e. During February, the company provided services for $280,000 on credit.
f. On February 28, the company estimated bad debts using 2 percent of credit sales.
g.

On March 1, the company loaned $18,000 to an employee who signed a 4% note, due in 9 months.

h. On March 15, the company collected $3,300 on the account written off one month earlier.
i. On March 31, the company accrued interest earned on the note.
j.

On March 31, the company adjusted for uncollectible accounts, based on the following aging analysis. Allowance for Doubtful Accounts has an unadjusted credit balance of $9,300.

For items (a)–(j), analyze the amount and direction (+ or ?) of effects on specific financial statement accounts and the overall accounting equation.

Prepare the journal entries for items (a)–(j).

Show how Accounts Receivable, Notes Receivable, and their related accounts would be reported in the current assets section of a classified balance sheet?

Solutions

Expert Solution

S. No. Accoutn Tittle Amount Amount
a Accounts receivable $330,000
             Service revenue $330,000
b Bad debt expense ($330000*2%) $6,600
             Allowance for doubtful accounts $6,600
c Cash $280,000
          Accounts receivable $280,000
d Allowance for dobtful accounts $3,300
           Accounts receivable $3,300
e Accounts receivable $280,000
             Service revenue $280,000
f Bad debt expense ($280000*2%) $5,600
             Allowance for doubtful accounts $5,600
g Notes receivable $18,000
             Cash $18,000
h Accounts receivable $3,300
            Allowance for doubtful accounts $3,300
Cash $3,300
           Accounts receivable $3,300
i Interest receivable ($18000*4%*1/12) $60
           Interest revenue $60
j Bad debt expense ($15570-$9300) $6,270
            Allowance for doubtful accounts $6,270
0-30 days 2380 ($47600*5%)
31-60 days 6495 ($43300*15%)
61-90 days 2575 ($10300*25%)
over 90 days 4120 ($10300*40%)
Total 15570

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