Question

Required information (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 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 $41,000 on credit. b. On January 31, the company estimated bad debts using 2 percent of credit sales. c. On February 4, the company collected $20,500 of accounts receivable. d. On February 15, the company wrote off a $150 account receivable. e. During February, the company provided services for $31.000 on credit. f On February 28, the company estimated bad debts using 2 percent of credit sales. g. On March 1, the company loaned $2,600 to an employee, who signed a 6% note, due in 6 months. h. On March 15, the company collected $150 on the account written off one month earlier. On March 31, the company accrued interest earned on the note. J. 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 $1,210. 0-30 119 $ Customer Alabama Tourism Bayside Bungalows Others (not shown to save space) Xciting Xcursions Total Accounts Receivable Estimated Uncollectible (%) Total $ 230 410 17,40€ 390 $18,430 Number of Days Unpaid 31-60 61-90 Over 90 $ 90 $ 30 $ 410 8,500 1,100 900 6,900 390 $ 7,400 3% $ 8,590 10% $ 1,130 20% $1,310 30%

Answer 1

The related accounts to accounts receivable will include an allowance for doubtful debts which need to be created based on the estimated uncollectible. On the other hand, the reference to notes receivable would be interest on that notes receivable which shall be on current assets side for 1 month interest.

WEB WIZARD INC
Partial Balance sheet
At March 31
Assets
Current Assets:
Accounts Receivable	$ 18,430
Allowance for doubtful accounts (see note)	$(1700)
Accounts Receivable, Net of Allowance		$ 16,730
Note Receivable		2,600
Interest Receivable(see note)		13
Total		$ 19,343

Working Note

	Total	0-30	31-60	61-90	>90
Total accounts receivable	18430	7400	8590	1130	1310
estimated uncollectible(%)		3%	10%	20%	30%
Estimated uncollectible ($)	1700	222	859	226	393

Allowance for bad debts = 1700

Interest = 2600*6%*1/12 = $13

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