Question

Sage Inc. experienced the following transactions for Year 1, its first year of operations:

1. Issued common stock for $120,000 cash.
2. Purchased $200,000 of merchandise on account.
3. Sold merchandise that cost $160,000 for $318,000 on account.
4. Collected $282,000 cash from accounts receivable.
5. Paid $180,000 on accounts payable.
6. Paid $62,000 of salaries expense for the year.
7. Paid other operating expenses of $78,000.
8. Sage adjusted the accounts using the following information from an accounts receivable aging schedule:

Number of Days Past Due	Amount			Percent Likely to Be Uncollectible	Allowance Balance
Current	$	21,600		0.01
0–30		9,000		0.05
31–60		1,800		0.10
61–90		1,800		0.20
Over 90 days		1,800		0.50

Required

1. Organize the transaction data in accounts under an accounting equation.
2. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Sage Inc. for Year 1.
3. What is the net realizable value of the accounts receivable at December 31, Year 1?

Answer 1

XI 5 2020-09(2) SEP.xlsx - Microsoft Excel ? X FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW DEVELOPER Sign in M16 f A B с D E F H J K M N o P 1 Answer: 1 2 Balance sheet Income statement Statement of cash flows 3 Liabilities + Equity Assets = Allowance Accounts for receivable Uncollectible account Revenue Expense Cash Accounts payable Inventpory Net income Common stock Retained earnings 4 $ 120,000 5 6 $ 200,000 $ 7 $ 318,000 8 $ (160,000) Event Issued common stock Purchased merchandise Sold merchandise Cost of Sold merchandise Collected from customer Paid to suppliers salaries expense other operating exp. Bad debts expese. 9 10 $ 120,000 $ 120,000 Financing Activity 200,000 $ 318,000 $318,000 $ 318,000 $ (160,000) $ 160,000 $(160,000) $ 282,000 Operating Activity (180,000) $ (180,000) Operating Activity $ (62,000) $ 62,000 $ (62,000) $ (62,000) Operating Activity $ (78,000) $ 78,000 $ (78,000) $ (78,000) Operating Activity $ (2,106) $ 2,106 $ (2,106) 20,000 $ 120,000 $ 15,894 $318,000 $302,106 $ 15,894 $ 82,000 $ $ 282,000 $ (282,000) $ (180,000) $ (62,000) $ (78,000) $ $ 82,000 $ 36,000 $ 11 12 13 (2,106) (2,106) $ 40,000 $ 14 15 Due 16 17 Estimated Percentage Amount of of Allowance of Accounts Uncollectabl doubtful receivable account $ 21,600 0.01$ 216 $ 9,000 0.05$ 450 $ 1,800 0.10 $ 180 $ 1,800 0.20$ 360 S 1.800 0.50 S 900 Sheet24 Sheet25 Sheet26 Sheet27 18 Current 0 to 30 days 31 to 60 days 61 to 90 days Over 90 days ... Sheet22 19 20 TITI Answer: 2 Sage Inc. Income statement For the month of December 31, Year 1 Sales revenue 318,000 Less: cost of goods sold 160.000 Sheet28 Sheet29 Sheet30 21 Activate Windows Go to Settings to activate Windows Sheet23 READY + 100% 01:49 i Search the web and Windows O ENG US 16-09-20

XI 5 2020-09(2) SEP.xlsx - Microsoft Excel ? X FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW DEVELOPER Sign in M16 : fi F H J K L M N o P 16 17 A B с E Estimated Percentage Amount of of Allowance of Accounts Uncollectabl doubtful Due receivable account Current $ 21,600 0.01$ 216 O to 30 days $ 9,000 0.05$ 450 31 to 60 days $ 1,800 0.10 $ 180 61 to 90 days $ 1,800 0.20$ 360 Over 90 days $ 1,800 0.50 $ 900 Allowance of doubtful account after adjustment $ 2,106 Accounts receivable $ 36,000 IT 18 19 20 21 22 Answer: 2 Sage Inc. Income statement For the month of December 31, Year 1 Sales revenue 318,000 Less: cost of goods sold 160,000 Gross profit 158,000 Operating expenses salaries expense 62,000 other operating expenses 78,000 Bad debt expense (or uncolle 2,106 Total expenses 142,106 Net income 15,894 23 24 25 26 Allowance of doubtful account after adjustment $ Less: Allowance of doubtful account before adjustment $ Adjustment of bad debts expense $ 2,106 0 2,106 27 28 29 30 31 32 33 Sage Inc. Retained earnings statement For the month of December 31, Year 1 Retained earnings, beginning Add: net income Less: Dividends (if any) Retained earnings, Dec 31, Year 1 0 34 35 36 Answer: 2 Sage Inc. Statement of cash flows For the month of December 31, Year 1 Operating activities Cash Received from Sales $ 282,000 Less: Cash paid for Inventory purchase $ (180,000) Less: salaries expense Paid $ (62,000) Less: Other operating expense Paid $ (78,000) Net cash flow used by operating activity $ (38,000) Investing activities Sheet22 Sheet23 Sheet24 Sheet25 Sheet26 Sheet27 15,894 0 15,894 37 38 39 Sage Inc. Balance sheet Sheet30 # Activate Windows Go to Settings to activate Windows Sheet28 Sheet29 READY + 100% 01:49 i Search the web and Windows O ENG US 16-09-20

XIA 5 2020-09(2) SEP.xlsx - Microsoft Excel ? X FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW DEVELOPER Sign in M60 X fi A D E F K L M N O P J 15,894 34 35 G H Add: net income Less: Dividends (if any) Retained earnings, Dec 31, Year 1 0 B с Cash Received from Sales Less: Cash paid for Inventory purchase Less: salaries expense Paid Less: Other operating expense Paid Net cash flow used by operating activity Investing activities $ 282,000 $ (180,000) $ (62,000) $ (78,000) 36 15,894 37 38 $ (38,000) 39 40 41 42 Financiang activities Proceeds from issue of common stock $ 120,000 Net cash flow provided by financing activity 82,000 43 $ 120,000 44 33,894 45 Net Increase in cash Add: beginning cash balance Ending cash balance 46 47 $ $ $ 82,000 0 82,000 40,000 155,894 Sage Inc. Balance sheet December 31, Year 1 Assets Cash Accounts receivable 36,000 Allowance for uncoloectaible (2,106) Inventory Total assets Liabilities and owner's Equity Liabilities Accounts payable Total Liabilities Stockholder' equity Common stock 120,000 Retained earnings 15,894 Total Stockholder' equity Total Liabilities and stockholder' equity 48 49 20,000 20,000 50 51 52 53 54 55 56 135,894 155,894 57 58 Answer: 3 net realizable value of the accounts receivable at December 31, Year 1 Check balance sheet 33,894 59 60 61 LActivate Windows Go to Settings to activate Windows, Sheet22 Sheet23 Sheet24 Sheet25 Sheet26 Sheet27 Sheet28 Sheet29 Sheet30 1 READY 3 1 + 100% 01:49 1 Search the web and Windows O ENG US 16-09-20