FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Related questions
Concept explainers
Question
[The following information applies to the questions displayed below.]
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
- During January, the company provided services for $30,000 on credit.
- On January 31, the company estimated bad debts using 1 percent of credit sales.
- On February 4, the company collected $15,000 of accounts receivable.
- On February 15, the company wrote off a $200 account receivable.
- During February, the company provided services for $20,000 on credit.
- On February 28, the company estimated bad debts using 1 percent of credit sales.
- On March 1, the company loaned $2,800 to an employee, who signed a 6% note, due in 6 months.
- On March 15, the company collected $200 on the account written off one month earlier.
- On March 31, the company accrued interest earned on the note.
- On March 31, the company adjusted for uncollectible accounts, based on an aging analysis (below). Allowance for Doubtful Accounts has an unadjusted credit balance of $1,100.
| Number of Days Unpaid | ||||||||||||||||
| Customer | Total | 0–30 | 31–60 | 61–90 | Over 90 | |||||||||||
| Alabama Tourism | $ | 200 | $ | 120 | $ | 70 | $ | 10 | ||||||||
| Bayside Bungalows | 300 | $ | 300 | |||||||||||||
| Others (not shown to save space) | 15,100 | 5,800 | 7,400 | 1,200 | 700 | |||||||||||
| Xciting Xcursions | 380 | 380 | ||||||||||||||
| Total Accounts Receivable | $ | 15,980 | $ | 6,300 | $ | 7,470 | $ | 1,210 | $ | 1,000 | ||||||
| Estimated Uncollectible (%) | 2 | % | 10 | % | 20 | % | 35 | % | ||||||||
|
Required:
|
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution
Trending nowThis is a popular solution!
Step by stepSolved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Manjiarrow_forwardBy the end of its first year of operations, Previts Corporation has credit sales of $690,000 and accounts receivable of $290,000. Given it’s the first year of operations, Previts’ management is unsure how much allowance for uncollectible accounts it should establish. One of the company’s competitors, which has been in the same industry for an extended period, estimates uncollectible accounts to be 2% of ending accounts receivable, so Previts decides to use that same amount. However, actual write-offs in the following year were 25% of the $290,000 (= $72,500). Previts’ inexperience in the industry led to making sales to high credit risk customers. 2. By the end of the second year, Previts has the benefit of hindsight to know that estimates of uncollectible accounts in the first year were too low. By how much did Previts underestimate uncollectible accounts in the first year? How did this underestimation affect the reported amounts of total assets and expenses at the end of the…arrow_forwardInnovative Tech Inc. (ITI) has been using the percentage of credit sales method to estimate bad debts. During November, ITI sold services on account for $100,000 and estimated that 3/4 of 1 percent of those sales would be uncollectible. Required: Prepare the November adjusting entry for bad debts. Starting in December, ITI switched to using the aging method. At its December 31 year-end, total Accounts Receivable is $93,200, aged as follows: (1) 1–30 days old, $77,000; (2) 31–90 days old, $12,000; and (3) more than 90 days old, $4,200. The average rate of uncollectibility for each age group is estimated to be (1) 12 percent, (2) 24 percent, and (3) 48 percent, respectively. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts. Before the end-of-year adjusting entry is made, the Allowance for Doubtful Accounts has a $1,700 credit balance at December 31. Prepare the December 31 adjusting entry. Show how the various accounts…arrow_forward
- At year end, Chief Company has a balance of $10,000 in accounts receivable of which $1,000 is more than 30 days past due. Chief has a credit balance of $100 in the allowance for doubtful accounts before any year end adjustments. Using the aging of accounts receivable method, Chief estimates that 1% of current accounts and 10% of accounts over 30 days past due are uncollectible. what is the amount of bad debt expense?arrow_forward3arrow_forwardRequired Information [The following information applies to the questions displayed below.] Web Wizard, Incorporated, 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. a. During January, the company provided services for $40,000 on credit. b. On January 31, the company estimated bad debts using 1 percent of credit sales. c. On February 4, the company collected $20,000 of accounts receivable. d. On February 15, the company wrote off $100 account receivable. e. During February, the company provided services for $30,000 on credit. f. On February 28, the company estimated bad debts using 1 percent of credit sales. g. On March 1, the company loaned $2,400 to an…arrow_forward
- Marigold Corp. has the following transactions related to notes receivable during the last 2 months of the year. The company does not make entries to accrue interest except at December 31. (Omit cost of goods sold entries.) Nov. 1 Loaned $54,000 cash to C. Bohr on a 12-month, 8% note. Dec. 11 Sold goods to K. R. Pine, Inc., receiving a $7,200, 90-day, 9% note. Dec. 16 Received a $12,000, 180-day, 7% note to settle an open account from A. Murdock. Dec. 31 Accrued interest revenue on all notes receivable. Journalize the transactions for Marigold Corp. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)arrow_forwardRequired information. [The following information applies to the questions displayed below.] At December 31, Hawke Company reports the following results for its calendar year. Cash sales. Credit sales $ 400,000 $1,000,000 In addition, its unadjusted trial balance includes the following items. Accounts receivable. $ 900,000 debit Allowance for doubtful accounts $ 7,200 debit 2. Bad debts are estimated to be 4% of credit sales. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31 balance sheet. Current assets: $ 0arrow_forwardInnovative Tech Inc. (ITI) has been using the percentage of credit sales method to estimate bad debts. During November, ITI sold services on account for $130,000 and estimated that 3/4 of 1 percent of those sales would be uncollectible. Required: 1. Prepare the November adjusting entry for bad debts. 2. Starting in December, ITI switched to using the aging method. At its December 31 year-end, total Accounts Receivable is $89,900, aged as follows: (1) 1–30 days old, $74,000; (2) 31–90 days old, $12,000; and (3) more than 90 days old, $3,900. The average rate of uncollectibility for each age group is estimated to be (1) 12 percent, (2) 24 percent, and (3) 48 percent, respectively. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts. 3. Before the end-of-year adjusting entry is made, the Allowance for Doubtful Accounts has a $1,550 credit balance at December 31. Prepare the December 31 adjusting entry. 4. Show how the various accounts…arrow_forward
- i need the answer quicklyarrow_forwardThe following information applies to the questions displayed below.] At December 31, Hawke Company reports the following results for its calendar year. Cash sales $ 320,000 Credit sales $ 800,000 In addition, its unadjusted trial balance includes the following items. Accounts receivable $ 432,000 debit Allowance for doubtful accounts $ 4,300 debit 3. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31 balance sheet.arrow_forwardCortez Corporation uses the percentage of sales method to estimate its uncollectible accounts. Cortez has an ending balance of accounts receivable of $10,000. The allowance for doubtful accounts showed a balance of $1,000 in the beginning of the period. During the year, a total of $300 in accounts was written off as uncollectible. The company made credit sales of $100,000 in the current period. It estimates that 5% of sales will prove to be uncollectible. What is the ending balance of allowance for doubtful accounts of the company for the current period? Please don't provide answer in image format thank youarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education