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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.

1. During January, the company provided services for $43,000 on credit.
2. On January 31, the company estimated bad debts using 2 percent of credit sales.
3. On February 4, the company collected $21,500 of accounts receivable.
4. On February 15, the company wrote off a $100 account receivable.
5. During February, the company provided services for $33,000 on credit.
6. On February 28, the company estimated bad debts using 2 percent of credit sales.
7. On March 1, the company loaned $3,000 to an employee, who signed a 6% note, due in 6 months.
8. On March 15, the company collected $100 on the account written off one month earlier.
9. On March 31, the company accrued interest earned on the note.
10. 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 $1,230.

					Number of Days Unpaid
Customer		Total		0–30			31–60			61–90			Over 90
Alabama Tourism	$	200		$	100		$	80		$	20
Bayside Bungalows		430											$	430
Others (not shown to save space)		17,600			7,100			8,700			1,000			800
Xciting Xcursions		400			400
Total Accounts Receivable	$	18,630		$	7,600		$	8,780		$	1,020		$	1,230
Estimated Uncollectible (%)					3	%		15	%		20	%		30	%

4. Sales Revenue and Service Revenue are two income statement accounts that relate to Accounts Receivable. Name two other accounts related to Accounts Receivable and Notes Receivable that would be reported on the income statement and indicate whether each would appear before, or after, Income from Operations.

Answer 1

Solution 4:

Web Wizard would report:
Bad debts expense	before	Income from operations
Interest revenue	after	Income from operations