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Homework answers / question archive / The following information applies to the questions displayed below) Execusmart Consultants has provided business consulting services for several years
The following information applies to the questions displayed below) Execusmart Consultants has provided business consulting services for several years. The company has been using the percentage of credit sales method to estimate bad debts but switched at the end of the first quarter this year to the aging of accounts receivable method. The company entered into the following partial list of transactions. a During January, the company provided services for $200,000 on credit b. On January 31, the company estimated bad debts using 1 percent of credit sales c On February 4, the company collected $100,000 of accounts receivable. d on February 15, the company wrote off a $500 account receivable e. During February, the company provided services for $150,000 on credit f On February 28, the company estimated bad debts using 1 percent of credit sales. 9. On March 1, the company loaned $12,000 to an employee, who signed a 10% note due in 3 months. h On March 15, the company collected $500 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 the following aging analysis, which includes the preceding transactions (as well as others not listed). Prior to the adjustment, Allowance for Doubtful Accounts had an unadjusted credit balance of $6,000
Customer Arrow Ergonomics Asymmetry Architecture Others (not shown to save spad) Weight Whittlers Total Accounts Receivable Estimated Uncollectible (%) Total $1,000 2,eee 85, eee 2,eee $90,000 Number of Days Unpaid 0-30 31-60 61-90 Over 90 $ 500 $ 400 $ 100 $ 2,000 34,000 42,000 5,888 4,60e 2,000 $36,500 $42,400 $ 5,100 $ 6,000 2% 10% 2ex 40%
Assets Liabilities Stockholm
Solution 1:
| Computation of allowance for estimated uncollectibles - Execusmart Consultant | |||||
| Customer | Balance | 0-30 days | 31-60 days | 61-90 days | Over 90 days |
| Total Receivables | $90,000.00 | $36,500.00 | $42,400.00 | $5,100.00 | $6,000.00 |
| Percentage uncollectibles | 2% | 10% | 20% | 40% | |
| Allowance for doubtful accounts | $8,390.00 | $730.00 | $4,240.00 | $1,020.00 | $2,400.00 |
| Event | Assets | = | Liabilities | + | Stockholder's Equity | |||
| a | Accounts receivables | $200,000.00 | Service revenue | $200,000.00 | ||||
| b | Allowance for doubtful accounts | -$2,000.00 | Bad debts expense | -$2,000.00 | ||||
| c | Cash | $100,000.00 | ||||||
| Accounts receivables | -$100,000.00 | |||||||
| d | Allowance for doubtful accounts | $500.00 | ||||||
| Accounts receivables | -$500.00 | |||||||
| e | Accounts receivables | $150,000.00 | Service revenue | $150,000.00 | ||||
| f | Allowance for doubtful accounts | -$1,500.00 | Bad debts expense | -$1,500.00 | ||||
| g | Note receivables | $12,000.00 | ||||||
| Cash | -$12,000.00 | |||||||
| h | Accounts receivables | $500.00 | ||||||
| Allowance for doubtful accounts | -$500.00 | |||||||
| Cash | $500.00 | |||||||
| Accounts receivables | -$500.00 | |||||||
| i | Interest receivables | $100.00 | Interest revenue | $100.00 | ||||
| J | Allowance for doubtful accounts | -$2,390.00 | Bad debts expense | -$2,390.00 |
| Solution 2: | |||
| Journal Entries | |||
| Event | Particulars | Debit | Credit |
| a | Accounts receivables Dr | $200,000.00 | |
| To Service revenue | $200,000.00 | ||
| (To record services provided on credit) | |||
| b | Bad debts Expense Dr | $2,000.00 | |
| To Allowance for doubtful accounts | $2,000.00 | ||
| (To record bad debts expense) | |||
| c | Cash Dr | $100,000.00 | |
| To Accounts receivables | $100,000.00 | ||
| (To record collection of receivables) | |||
| d | Allowance for doubtful accounts Dr | $500.00 | |
| To Accounts receivables | $500.00 | ||
| (To write off receivables) | |||
| e | Accounts receivables Dr | $150,000.00 | |
| To Service revenue | $150,000.00 | ||
| (To record services provided on credit) | |||
| f | Bad debts Expense Dr | $1,500.00 | |
| To Allowance for doubtful accounts | $1,500.00 | ||
| (To record bad debts expense) | |||
| g | Notes receivables Dr | $12,000.00 | |
| To Cash | $12,000.00 | ||
| (Loan given to employee against note) | |||
| h1 | Accounts receivables Dr | $500.00 | |
| To Allowance for doubtful accounts | $500.00 | ||
| (To reinstate debtor account) | |||
| h2 | Cash Dr | $500.00 | |
| To Accounts receivables | $500.00 | ||
| (To record collection from customer previously written off) | |||
| i | Interest receivables Dr | $100.00 | |
| To Interest revenue ($12,000*10%*1/12) | $100.00 | ||
| (To record interest revenue) | |||
| j | Bad debts Expense Dr ($8,390-$6,000) | $2,390.00 | |
| To Allowance for doubtful accounts | $2,390.00 | ||
| (To record bad debts expense) |
