Question

Required information (The following information applies to the questions displayed below.] 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. a. During January, the company provided services for $41,000 on credit. b. On January 31, the company estimated bad debts using 2 percent of credit sales c. On February 4, the company collected $20,500 of accounts receivable. d. On February 15, the company wrote off a $150 account receivable e. During February, the company provided services for $31.000 on credit. 1 On February 28, the company estimated bad debts using 2 percent of credit sales. 9. On March 1, the company loaned $2,600 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. 1. 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 $1.210. 0-30 110 S Customer Alabama Tourism Bayside Bungalows Others (not shown to save space) Xciting Xcursions Total Accounts Receivable Estimated Uncollectible (%) Total $ 230 410 17,400 390 $18,430 Number of Days Unpaid 31-60 61-90 Over 90 $ 905 30 $ 412 8,500 1,100 900 6,900 390 $ 7,400 3% 58,590 10% $ 1,130 20% $ 1,310 30%

Answer 1

Accounting equation is based on the double entry system of book keeping. It means that whenever there is transactions, there will be two accounts recorded. As per accounting equation, assets should equal the sum of liabilities and stockholders’ equity.

	Assets		=	Liabilities		+	Stockholders’ equity
a.	Accounts receivable	+41,000					Service revenue	+41000
b.	Allowance for doubtful accounts	-820					Bad debt expense	-820
C	Cash	+20,500
	Accounts receivable	-20,500
d.	Accounts receivable	-150
	Allowance for doubtful accounts	+150
e.	Accounts receivable	+31000					Service revenue	+31000
f.	Allowance for doubtful accounts (2% of 31,000)	-620					Bad debt expense	-620
g.	Cash	-2600
	Note receivable	+2600
h.	Accounts receivable	+150
	Allowance for doubtful accounts	-150
	Cash	+150
	Accounts receivable	-150
i	Interest receivable	+13					Interest revenue	+13
J	Allowance for doubtful accounts	-490					Bad debt expense	-490

1. Interest = 2600*6%*1/12 = $13

	Total	0-30	31-60	61-90	>90
Total accounts receivable	18430	7400	8590	1130	1310
estimated uncollectible(%)		3%	10%	20%	30%
Estimated uncollectible ($)	1700	222	859	226	393

Allowance for bad debts = 1700

Less: Current bad debt = 1210

Adjustment required = $ 490

kindly upvote