Question

Web Wizard, Inc., has provided information technology 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 selected transactions during the first quarter of 2017:

1. During January, the company provided services for $40,000 on credit.
2. On January 31, the company estimated bad debts using 1 percent of credit sales.
3. On February 4, the company collected $20,000 of accounts receivable.
4. On February 15, the company wrote off a $100 account receivable.
5. During February, the company provided services for $30,000 on credit.
6. On February 28, the company estimated bad debts using 1 percent of credit sales.
7. On March 1, the company loaned $2,400 to an employee who signed a 6 percent note, due in six months.
8. On March 15, the company collected $100 on the account written off one month earlier.
9. On March 31, the company adjusted for uncollectable 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 $1,200.
10. On March 31, the company accrued interest earned on the note.

				Number of Days Unpaid
Customer	Total			0-30			31-60			61-90			Over 90
Altavista Tourism	$	200		$	100		$	80		$	20
Bayling Bungalows		400											$	400
Others (not shown to save space)		17,000			6,800			8,400			1,000			800
Xciting Xcursions		400			400
Total Accounts Receivable	$	18,000		$	7,300		$	8,480		$	1,020		$	1,200
Estimated uncollectable (%)					2	%		10	%		20	%		40	%

2. Show how the receivables related to these transactions would be reported in the current assets section of a classified balance sheet. (Amounts to be deducted should be indicated by a minus sign.) WEB WIZARD, INC. Partial Balance Sheet At March 31, 2017 Assets Current assols: Accounts receivable 50 3. Name the accounts related to Accounts Receivable and Nate Receivable that would be reported on the income statement and indicate whether they would appear before or after Income from Operations. Accounts Reported on the Income Statement Before/After Income from Operations

Answer 1

Solution 2 and 3:

АСC AА АВ AD АЕ 1 2 5 6 7 8 Web Wizard Inc. (Partial Balance Sheet) 9 At March 31 10 Amount Assets Current Assets: 11 Accounts receivables $18,000 12 Allowance for doubtful accounts Accounts receivables, net of allowance $1,678 13 $16,322 14 15 Note Receivables $2,400 16 Interest receivables $12 17 18 19 20 21 22 Web Wizard would report: 23 Bad debts expense Income from operations Income from operations before 24 Interest revenue after 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Ал Sheet202 (6) Sheet299 (5) et793 Sheet794 Sheet755 AE

Working note:

S V X Y Z 1 2 Computation of allowance for estimated uncolle ctibles - Web Wizard Inc. Over 90 0-30 days 31-60 days 61-90 days Balance Customer days $1,200 Total Receivables $18,000 $7,300 $8,480 $1,020 5 Percentage uncollectibles Allowance for doubtful accounts 2% 10% 20% 40% 6 $1,678 $146 $848 $204 $480 7 8 9 10 11 12. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 et 793 Sheet202 (6) Sheet299 (5) Sheet794 Sheet755