Patel Service Co. does make a few sales on account but is mostly a cash business....
Patel Service Co. does make a few sales on account but is mostly a cash business. Consequently, it uses the direct write-off method to account for uncollectible accounts. During Year 1, Patel Service Co. earned $37,650 of cash revenue and $9,413 of revenue on account. Cash operating expenses were $23,652. After numerous attempts to collect a $286 account receivable from Sam Stephens, the account was determined to be uncollectible in Year 1. Required: a. Show the effects of (1) cash revenue, (2) revenue on account, (3) cash expenses, and (4) write off of the uncollectible account on the financial statements using a horizontal statements model like the one shown here. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element is not affected by the event.
b. What amount of net income did Patel Service Co. report on the Year 1 income statement?
c. Prepare the general journal entries for the four accounting events listed in Requirement a.
Homework Answers
| 1 | Effect of each transaction | |||||||||||||
| Assets | Stockholders Equity | Income Statement | ||||||||||||
| Event No. | Cash | + | Accounts Receivable | = | Common Stock | + | Retained Earnings | Revenue | - | Expenses | = | Net Income | Cash Flow | |
| 1 | $37,650 | + | = | + | $37,650 | - | = | $37,650 | $37,650 | OA | ||||
| 2 | + | $9,413 | = | + | $9,413 | - | = | $9,413 | NA | |||||
| 3 | ($23,652) | + | = | + | - | $23,652 | = | ($23,652) | ($23,652) | OA | ||||
| 4 | + | ($286) | = | + | - | $286 | = | ($286) | NA | |||||
| Balance | $13,998 | + | $9,127 | = | $0 | + | $0 | $47,063 | - | $23,938 | = | $23,125 | ||
| b | Income Statement | ||
| Patel Service Co. | |||
| Particulars | Amount | ||
| Service Revenue | $47,063 | ||
| Less: | |||
| Operating expenses | $23,652 | ||
| Bad debt expenses | $286 | ||
| Total operating expenses | $23,938 | ||
| Net income | $23,125 | ||
| c | Journal Entries | ||
| Date | Account Titles | Debit | Credit |
| Cash | $37,650 | ||
| Service Revenue | $37,650 | ||
| (To record cash revenue earned for service performed) | |||
| Accounts receivable | $9,413 | ||
| Service Revenue | $9,413 | ||
| (To record service performed on account) | |||
| Operating expenses | $23,652 | ||
| Cash | $23,652 | ||
| (To record operating expenses paid in cash) | |||
| Bad debt expenses | $286 | ||
| Accounts receivable | $286 | ||
| (To record uncollectibles for the year) |
Add Answer to:
Patel Service Co. does make a few sales on account but is mostly
a cash business....
Patel Service Company does make a few sales on account but is mostly a cash business.
Patel Service Company does make a few sales on account but is mostly a cash business. Consequently, it uses the direct write-off method to account for uncollectible accounts. During Year 1, Patel Service Company earned $33,600 of cash revenue and $8,400 of revenue on account. Cash operating expenses were $27,786. After numerous attempts to collect a $287 account receivable from Sam Stephens, the account was determined to be uncollectible in Year 1. Required:Show the effects of (1) cash revenue, (2) revenue...
During the first year of operation, 2018, Direct Service Co. recognized $320,000 of service revenue on account. At the...
During the first year of operation, 2018, Direct Service Co. recognized $320,000 of service revenue on account. At the end of 2018, the accounts receivable balance was $60,000. For this first year in business the owner believes uncollectible accounts expense will be about 3 percent of sales on account Required a. What amount of cash did Direct Service collect from accounts receivable during 2018? b. Assuming Direct Service uses the allowance method to account for uncollectible accounts, what amount should...
During the first year of operation, 2018, Direct Service Co. recognized $350,000 of service revenue on...
During the first year of operation, 2018, Direct Service Co. recognized $350,000 of service revenue on account. At the end of 2018, the accounts receivable balance was $63,000. For this first year in business, the owner believes uncollectible accounts expense will be about 3 percent of sales on account. Required a. What amount of cash did Direct Service collect from accounts receivable during 2018? b. Assuming Direct Service uses the allowance method to account for uncollectible accounts, what amount should...
During the first year of operation, 2018, McGinnis Appliance recognized $275,000 of service revenue on account....
During the first year of operation, 2018, McGinnis Appliance recognized $275,000 of service revenue on account. At the end of 2018. the accounts recevable balance was $55,300. Even though this is his first year in business, the owner believes he will collect all but about 3 percent of the ending balance. Required a. What amount of cash was collected by McGinnis during 2018? b. Assuming the use of an allowance system to account for uncollectible accounts, what amount should McGinnis...
Grover Inc. uses the allowance method to account for uncollectible accounts expense. Grover Inc. experienced the...
Grover Inc. uses the allowance method to account for
uncollectible accounts expense. Grover Inc. experienced the
following four accounting events in Year 1:
Recognized $92,000 of revenue on account.
Collected $78,000 cash from accounts receivable.
Wrote off uncollectible accounts of $720.
Recognized uncollectible accounts expense. Grover estimated
that uncollectible accounts expense will be 1 percent of sales on
account.
Required
a. Show the effect of each event on the elements
of the financial statements, using a horizontal statements model
like...
Troy Company earned $15,000 of cash revenue. Troy incurred $12,000 of utility expense on account during...
Troy Company earned $15,000 of cash revenue. Troy incurred
$12,000 of utility expense on account during Year 1. The company
made cash payments of $8,000 to reduce its accounts payable during
Year 1.
Required
Show the effects of the events on the financial statements
using a horizontal financial statements model like the following
one. In the Cash Flow column, use OA to designate operating
activity, IA for investment activity, FA for financing activity, NC
for net change in cash and...
Exercise 7-1A Analysis of financial statement effects of accounting for uncollectible accounts under the allowance method...
Exercise 7-1A Analysis of financial statement effects of accounting for uncollectible accounts under the allowance method LO 7-1 Businesses using the allowance method for the recognition of uncollectible accounts expense commonly experience four accounting events: 1. Recognition of uncollectible accounts expense through a year-end adjusting entry. 2. Write-off of uncollectible accounts. 3. Recognition of revenue on account. 4. Collection of cash from accounts recevable. Required Show the effect of each event on the elements of the financial statements, using a...
Rainey Enterprises loaned $20,000 to Small Co. on June 1, Year 1, for one year at...
Rainey Enterprises loaned $20,000 to Small Co. on June 1, Year
1, for one year at 6 percent interest.
Required
Show the effects of the following transactions in a horizontal
statements. In the Statement of Cash Flows column, indicate whether
the item is an operating activity (OA), an investing activity (IA),
or a financing activity (FA). (Do not round intermediate
calculations. Enter any decreases to account balances and cash
outflows with a minus sign. Not all cells in the "Statement...
The following transactions apply to Hooper Co. for Year 1, its first year of operations: Issued...
The following transactions apply to Hooper Co. for Year 1, its first year of operations: Issued $110,000 of common stock for cash. Provided $90,000 of services on account. Collected $76,000 cash from accounts receivable. Loaned $13,000 to Mosby Co. on November 30, Year 1. The note had a one-year term to maturity and a 8 percent interest rate. Paid $44,000 of salaries expense for the year. Paid a $2,500 dividend to the stockholders. Recorded the accrued interest on December 31,...
1. Performed $104,500 of services for clients on account. 2. Performed $57,000 of services for cash....
1. Performed $104,500 of services for clients on account. 2. Performed $57,000 of services for cash. 3. Incurred $62,000 of other operating expenses on account 4. Paid $23,500 cash to an employee for salary. 5. Collected $71,000 cash from accounts receivable. 6. Paid $26,000 cash on accounts payable. 7. Paid a $7,000 cash dividend to the stockholders. 8. Accrued salaries were $5,400 at the end of Year 1. Required a. Show the effects of the events on the financial statements...
During the first year of operation, 2018, Direct Service Co. recognized $320,000 of service revenue on account. At the end of 2018, the accounts receivable balance was $60,000. For this first year in business the owner believes uncollectible accounts expense will be about 3 percent of sales on account Required a. What amount of cash did Direct Service collect from accounts receivable during 2018? b. Assuming Direct Service uses the allowance method to account for uncollectible accounts, what amount should...
During the first year of operation, 2018, Direct Service Co. recognized $350,000 of service revenue on account. At the end of 2018, the accounts receivable balance was $63,000. For this first year in business, the owner believes uncollectible accounts expense will be about 3 percent of sales on account. Required a. What amount of cash did Direct Service collect from accounts receivable during 2018? b. Assuming Direct Service uses the allowance method to account for uncollectible accounts, what amount should...
During the first year of operation, 2018, McGinnis Appliance recognized $275,000 of service revenue on account. At the end of 2018. the accounts recevable balance was $55,300. Even though this is his first year in business, the owner believes he will collect all but about 3 percent of the ending balance. Required a. What amount of cash was collected by McGinnis during 2018? b. Assuming the use of an allowance system to account for uncollectible accounts, what amount should McGinnis...
Grover Inc. uses the allowance method to account for
uncollectible accounts expense. Grover Inc. experienced the
following four accounting events in Year 1:
Recognized $92,000 of revenue on account.
Collected $78,000 cash from accounts receivable.
Wrote off uncollectible accounts of $720.
Recognized uncollectible accounts expense. Grover estimated
that uncollectible accounts expense will be 1 percent of sales on
account.
Required
a. Show the effect of each event on the elements
of the financial statements, using a horizontal statements model
like...
Troy Company earned $15,000 of cash revenue. Troy incurred
$12,000 of utility expense on account during Year 1. The company
made cash payments of $8,000 to reduce its accounts payable during
Year 1.
Required
Show the effects of the events on the financial statements
using a horizontal financial statements model like the following
one. In the Cash Flow column, use OA to designate operating
activity, IA for investment activity, FA for financing activity, NC
for net change in cash and...
Exercise 7-1A Analysis of financial statement effects of accounting for uncollectible accounts under the allowance method LO 7-1 Businesses using the allowance method for the recognition of uncollectible accounts expense commonly experience four accounting events: 1. Recognition of uncollectible accounts expense through a year-end adjusting entry. 2. Write-off of uncollectible accounts. 3. Recognition of revenue on account. 4. Collection of cash from accounts recevable. Required Show the effect of each event on the elements of the financial statements, using a...
Rainey Enterprises loaned $20,000 to Small Co. on June 1, Year
1, for one year at 6 percent interest.
Required
Show the effects of the following transactions in a horizontal
statements. In the Statement of Cash Flows column, indicate whether
the item is an operating activity (OA), an investing activity (IA),
or a financing activity (FA). (Do not round intermediate
calculations. Enter any decreases to account balances and cash
outflows with a minus sign. Not all cells in the "Statement...
1. Performed $104,500 of services for clients on account. 2. Performed $57,000 of services for cash. 3. Incurred $62,000 of other operating expenses on account 4. Paid $23,500 cash to an employee for salary. 5. Collected $71,000 cash from accounts receivable. 6. Paid $26,000 cash on accounts payable. 7. Paid a $7,000 cash dividend to the stockholders. 8. Accrued salaries were $5,400 at the end of Year 1. Required a. Show the effects of the events on the financial statements...
Most questions answered within 3 hours.
-
Computer Programming II CS141(Java)
Mention the appropriate relationship between following
classes:
HOD–StaffMember
Car–Ferrari
Student-Address
BankAccount–FixedAccount
House-Building...
asked 48 minutes ago -
Assume one of your finals has 50 questions on it, and
lucky for you, it's all...
asked 2 hours ago -
Rice Products in Bangladesh
Business behavior is derived in large part from the basic cultural
environment...
asked 3 hours ago -
The following base sequence is found for a mRNA fragment from
wild-type E. coli: 5'- UAUCAGUAGAUAAUGUAACC-3'...
asked 3 hours ago -
For this exercise, round all regression parameters to three
decimal places.
One of the two tables...
asked 4 hours ago -
What is the 5% level of significance for mean = 3.60, standard
deviation = 0.94, and...
asked 4 hours ago -
Prior to beginning work on this discussion, please read the
article by Hayley Peterson, 15 Companies...
asked 4 hours ago -
Which pair of aqueous solutions, when mixed, will form a
precipitate?
A) NaNO3 and AgC2H3O2
B)...
asked 4 hours ago -
1-Write an algorithm to get two numbers from the user (as
inputs) and calculate the sum...
asked 8 hours ago -
Define white-collar crime. What is the difference between
offender and offense-based definitions of white-collar crime? What...
asked 9 hours ago -
Consider a reaction which is 1st order with respect to A and 1st
order with respect...
asked 9 hours ago -
c++
The length of the hypotenuse of a right-angled triangle is the
square root of the...
asked 9 hours ago