Question

Execusmart Consultants has provided business consulting services for several years. The company has been using the percentage of credit sales method to estimate bad debts but switched at the end of the first quarter this year to the aging of accounts receivable method. The company entered into the following partial list of transactions. a. During January, the company provided services for $210,000 on credit. b. On January 31, the company estimated bad debts using 1 percent of credit sales. c. On February 4, the company collected $105,000 of accounts receivable. d. On February 15, the company wrote off a $550 account receivable. e. During February, the company provided services for $160,000 on credit. f. On February 28, the company estimated bad debts using 1 percent of credit sales. g. On March 1, the company loaned $12,000 to an employee, who signed a 8% note due in 3 months. h. On March 15, the company collected $550 on the account written off one month earlier. 1. On March 31, the company accrued interest earned on the note. 1. On March 31, the company adjusted for uncollectible accounts, based on the following aging analysis, which includes the preceding transactions (as well as others not listed). Prior to the adjustment, Allowance for Doubtful Accounts had an unadjusted credit balance of $6,200. Customer Arrow Ergonomics Asymmetry Architecture Others (not shown to save space) Weight Whittlers Total Accounts Receivable Estimated Uncollectible (%) Total $ 1,300 2,100 79,500 2,100 $ 85,000 Number of Days Unpaid 0–30 31–60 61–90 Over 90 $ 600 $ 500 $ 200 $2,100 30,300 40,000 5,100 4,100 2,100 $33,000 $40,500 $5,300 $6,200 38 108 208 408

Answer 1

Solution 1:

Event Assets Liabilities Stockholder's Equity Service revenue Bad debts expense $210,000.00 $2,100.00 b d Accounts receivables Allowance for doubtful accounts Cash Accounts receivables Allowance for doubtful accounts Accounts receivables Accounts receivables Allowance for doubtful accounts Note receivables Cash Accounts receivables Allowance for doubtful accounts $210,000.00 $2,100.00 $105,000.00 $105,000.00 $550.00 $550.00 $160,000.00 $1,600.00 $12,000.00 $12,000.00 $550.00 $550.00 $550.00 $550.00 $80.00 Service revenue Bad debts expense $160,000.00 $1,600.00 Cash Interest revenue $15.00 Accounts receivables Interest receivables (12000*8%*1/12) Allowance for doubtful accounts ($8580-6200) $2,380.00 Bad debts expense $2,380.00 25 26 28 29 -299 (5) Sheet202 (6) Sheet756 (2) Sheet768 Sheet202 (8) Sheet785 Sheet790 Sheet795 III 0 <

w - z AA Computation of allowance for estimated uncollectibles - Execusmart Consultants Customer Balance 0-30 days 31-60 days 61-90 days Total Receivables $85,000.00 $33,000.00 $40,500.00 $5,300.00 Percentage uncollectibles 3% 10% 20% Allowance for doubtful accounts $8,580.00 $990.00 $4,050.00 $1,060.00 Over 90 davs $6,200.00 40% $2,480.00 -299 (5) Sheet202 (6) Sheet756 (2) Sheet768 Sheet202 (8) Sheet785 Sheet790 Sheet795

Solution 3 and 4:

АА AB AC AD AE AF A 00 va Amount 11 Execusmart Consultants (Partial Balance Sheet) At March 31 Assets Current Assets: Accounts receivables - Gross $85,000.00 Allowance for doubtful accounts $8,580.00 Accounts receivables, net of allowance $76,420.00 15 16 Note Receivables Interest receivables (12000*8%*1/12) $12,000.00 $80.00 17 21 22 23 24 25 26 27 Execusmart Consultants would report: Bad debts expense Interest revenue before after Income from operations Income from operations +299 (5) Sheet202 (6) Sheet756 (2) Sheet768 Sheet202 (8) Sheet785 Sheet790 Sheet795