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 partial list of transactions during the first quarter. a. During January, the company provided services for $49,000 on credit. b. On January 31, the company estimated bad debts using 2 percent of credit sales. c. On February 4, the company collected $24,500 of accounts receivable. d. On February 15, the company wrote off a $100 account receivable. e. During February, the company provided services for $39,000 on credit. f. On February 28, the company estimated bad debts using 2 percent of credit sales. On March 1, the company loaned $3,000 to an employee who signed a 6% note, due 9. in 6 months. On March 15, the company collected $100 on the account written off one month earlier. İ. On March 31, the company accrued interest earned on the note. On March 31, the company adjusted for uncollectible accounts, based on an aging j. analysis (below). Allowance for Doubtful Accounts has an unadjusted credit balance of $1,290.

Answer 1

Solution:

DE E Event Assets Liabilities Stockholder's Equity Service revenue Bad debts expense $49,000.00 -$980.00 6 10 $49,000.00 $980.00 $24,500.00 $24,500.00 $100.00 $100.00 $39,000.00 $780.00 $3,000.00 $3,000.00 $100.00 -$100.00 $100.00 -$100.00 $15.00 Service revenue Bad debts expense $39,000.00 $ 780.00 Accounts receivables Allowance for doubtful accounts Cash Accounts receivables Allowance for doubtful accounts Accounts receivables Accounts receivables Allowance for doubtful accounts Note receivables Cash Accounts receivables Allowance for doubtful accounts Cash Accounts receivables Interest receivables (3000*6%*1/12) Allowance for doubtful accounts (2244-1290) 12 13 14 15 16 Interest revenue $15.00 $954.00 Bad debts expense $954.00 20 22 23 24 25 26 27 et793 Sheet794 ) Sheet755 Sheet299 (5) Sheet202 (6) Sheet756 (2) Sheet768 Sheet202 (8)

W АА Computation of allowance for estimated uncollectibles - Web Wizard Inc. Customer Balance $19,890 Total Receivables Percentage uncollectibles Allowance for doubtful accounts 0-30 days 31-60 days 61-90 days $8,200 $9,380 $1,020 3% 15% 20% $246 $1,407 $204 Over 90 days $1,290 30% $387 $2,244 20 21 22 et793 Sheet794 ) Sheet755 Sheet299 (5) Sheet202 (6) Sheet756 (2) Sheet768 Sheet202 (8)