Question

Vulcan Service Co. experienced the following transactions for Year 1, its first year of operations:

1. Provided $76,000 of services on account.
2. Collected $45,600 cash from accounts receivable.
3. Paid $26,000 of salaries expense for the year.
4. 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	$	22,496		.01
0-30		1,520		.05
31-60		2,128		.10
61-90		1,824		.30
Over 90 days		2,432		.50

Required
a. Record the above transactions in general journal form and post to T-accounts.
b. Prepare the income statement for Vulcan Service Co. for Year 1.
c. What is the net realizable value of the accounts receivable at December 31, Year 1?

Answer 1

Transaction No.	Journal Entries	Dr. ($)	Cr. ($)
1	accounts receivable	76000
	service revenue		76000
2	cash	45600
	accounts receivable		45600
3	salaries expenses	26000
	cash		26000
4	uncollectible accounts expenses	2277
	allowance for doubtful accounts		2277

Income Statement
For the year ended Dec.31	Amounts ($)	Amounts ($)
service revenue		76000
operating expenses:
salaries expenses	26000
uncollectible accounts expenses	2277
total operating expenses		28277
net income		47723

calculation of net realisable value	Amounts ($)
accounts receivable	30400
less uncollectible accounts expenses	2277
net realisable value	28123

cash
date	amount	date	amount
beg balance	0	3	26000
2	45600	ending balance	19600
total	45600	total	45600
salaries expenses
date	amount	date	amount
beg balance	0
3	26000	ending balance	26000
total	26000	total	26000
accounts receivable
date	amount	date	amount
beg balance	0	2	45600
1	76000	ending balance	30400
total	76000	total	76000
service revenue
date	amount	date	amount
		beg balance	0
ending balance	76000	1	76000
total	76000	total	76000
uncollectible accounts expenses
date	amount	date	amount
4	2277
allowance for doubtful accounts
date	amount	date	amount
		4	2277

working notes

current	22496	0.01	225
0-30	1520	0.05	76
31-60	2128	0.1	213
61-90	1824	0.3	547
Over 90 days	2432	0.5	1216
total	30400		2277