Question

Bilbo Industries experienced the following transactions for 2017, its first year of operations:

? Provided $182,000 of services on account
? Collected $144,000 cash from accounts receivable
? Paid $72,000 of salaries expense for the year.
? Adjusted the accounts using the following information from an accounts receivable aging schedule:

Number of Days Past Due	Amount	% Likely to be Uncollectible
Current	$15,600	1%
1-30	$9,000	5%
31-60	$4,000	10%
61-90	$4,400	25%
Over 90 Days	$5,000	50%

A) Record the above transactions in T-Accounts and then prepare an Income Statement for Bilbo Industries.

B) What is the net realizable value of the accounts receivable at December 31, 2017.

Answer 1

Cash					Service revenue
beg bal					Beg.bal
A/R	144,000	salaries	72,000				A/R	182,000
end bal	72000				end bal			182,000
Account receivable					Salaries expense
Beg.Bal					Beg.bal
servie re	182,000	cash	144,000		cash	72,000
end bal	38000				end bal	72,000
Allowance for Doubtful accounts					uncollectible accounts expense
Beg.bal					BegBal
		expense	4,606		allowance	4,606
End bal			4606		end bal	4606
Number of Days past due			amount	%	estimated
					amount
current			15,600	1%	156
1---30			9,000	5%	450
31---60			4,000	10%	400
61---90			4,400	25%	1100
over 90 days			5,000	50%	2500
total estimated amount			38,000		4606
		income statement
	service revenue					182,000
	less:Expense
	salarie sexpense				72,000
	uncollectible accounts expense				4,606
	total expense					76,606
	net income					105,394
b)
	net realizable value at dec 31,2017
	Accounts receivable					38,000
	less allowance ofr uncollectible accounts					4,606
	net realizable value					33,394