Question

Vulcan Service Co. experienced the following transactions for Year 1, its first year of operations 1. Provided $82,000 of services on account. 2. Collected $49,200 cash from accounts receivable. 3. Paid $28,000 of salaries expense for the year 4. Adjusted the accounts using the following information from an accounts receivable aging schedule Number of Days Past Due Percent Likely to Be Uncollectible .01 05 .10 .30 .50 Allowance Balance Current 0-30 31-60 61-90 Over 90 days Amount $24,272 1, 640 2,296 1,968 2,624 Required a. Record the above transactions in general journal form and post to T-accounts b. Prepare the income statement for Vulcan Service Co. for Year 1 c. What is the net realizable value of the accounts receivable at December 31, Year 1?

Answer 1

a) 1) Accounts Receivable 82000 Service revenue 82000 To record service revenue earned) 2) Cash 49200 Accounts receivables 49200 (To record receipt of cash from receivables) 3) SalaiesExpense 28000 Cash 28000 (To record payment of Salaries) 4) Uncollectable Accounts Expense 2457 Allowance for doubtful accounts 2457 To record allowance for doubtful accounts)

c) Income Statement Service revenue 82000 Operating Expenses: Salaries Expense Uncollectable Accounts Expense 28000 2457 30457 Net Income 51543

c) Uncollectable Accounts Expense Percentage likely to be uncollectableBalance Number of Days Past due Current 0-30 31-60 61-90 Over 90 days Allowance Amount 24272 1640 2296 1968 2624 0.01 0.05 0.1 0.3 0.5 243 82 230 590 1312 Total 2457 Net Realizable Value: Accounts receivable Less: Allowance 32800 2457 30343