Question

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 accotnts receivable method. The company entered into the following partial list of transactions during the first quarter. a. During January, the company provided services for $34,000 on credit. b. On January 31, the company estimated bad debts using 1 percent of credit sales. c. On February 4, the company collected $17,000 of accounts receivable. d. On February 15, the company wrote off a $150 account receivable. e. During February, the company provided services for $24,000 on credit. f On February 28, the company estimated bad debts using 1 percent of credit sales. g. On March 1, the company loaned $2,200 to an employee, who signed a 6% note, due in 6 months. h.On March 15, the company collected $150 on the account written off one month earlier. i. On March 31, the company accrued interest earned on the note. j. 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 $1,140. Number of Days Unpaid 31-60 0-30 $ Total 230 $ 340 16,000 390 61-90 Customer Alabama Tourism Bayside Bungalows Others (not shown to save space) Xciting Xcursions Total Accounts Receivable Estimated Uncollectible (% Over 90 110 90 30 $340 900 6,200 390 $16,960 6,700 2% 7,800 1,100 $ 7,890 10% $1,130 $1,240 30% 20%

Answer 1

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Web Wizard Inc.
Allowance for Doubtful Accounts that should be at year end:
	F	G	H=F*G
Age Group	Amount $	Uncollectible %	Allowance for Doubtful Accounts
0-30 Days	6,700.00	2%	134.00
31-60 Days	7,890.00	10%	789.00
61-90 Days	1,130.00	20%	226.00
Over 90 days	1,240.00	30%	372.00
	16,960.00		1,521.00
Interest Receivable	Amount $	Note
Notes receivable to employee	2,200.00	A
Interest rate	6%	B
Total Interest amount	132.00	C=A*B
Number of months	6.00	D
Interest Receivable for March	22.00	E=C/D
Balance Sheet
At March 31
Assets	Amount $	Amount $
Current Assets
Accounts Receivable	16,960.00
Allowance for Doubtful Accounts	1,521.00
Accounts Receivable, Net of Allowance		15,439.00
Notes receivable (Short Term)		2,200.00
Interest Receivable		22.00
Total		17,661.00