Question

Prepare an answer sheet with the column headings shown here. For each of the following transactions or adjustments, indicate the effect of the transaction or adjustment on the appropriate balance sheet category and on net income by entering for each account affected the account name and amount and indicating whether it is an addition (+) or a subtraction (–). Transaction a has been done as an illustration. Net income is not affected by every transaction. In some cases only one column may be affected because all of the specific accounts affected by the transaction are included in that category.

1. Accrued interest revenue of $30 on a note receivable.

2. Recorded estimated bad debts in the amount of $725.

3. Wrote off an overdue account receivable of $510.

4. Converted a customer's $1,100 overdue account receivable into a note.

5. Accrued $46 of interest earned on the note (in d).

6. Collected the accrued interest (in e).

7. Recorded $4,800 of sales, 75% of which were on account.

8. Recognized cost of goods sold in the amount of $3,840.

Answer 1

Answer

--Requirement as asked

	Balance Sheet			Income Statement
Transaction	Current Assets	Current Liabilities	Stockholder's Equity	Net Income
a	Interest receivables + 30			Interest Revenue +30
b	Allowance for Doubtful accounts + 725			Bad Debt Expense +725
c	Accounts receivables - 510, Allowance for Doubtful accounts - 510
d	Accounts receivables -1100, Notes receivables +1100
e	Interest receivables +46			Interest Revenue +46
f	Cash +46, Interest receivables -46
g	Cash +1200, Accounts receivables +3600			Sales Revenue +4800
	Inventory -3840			Cost of Goods Sold +3840