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 accounts receivable method. The company entered into the following partial list of transactions during the first quarter.

During January, the company provided services for $46,000 on credit.

On January 31, the company estimated bad debts using 1 percent of credit sales.

On February 4, the company collected $23,000 of accounts receivable. On February 15, the company wrote off a $100 account receivable. During February, the company provided services for $36,000 on credit.

On February 28, the company estimated bad debts using 1 percent of credit sales.

On March 1, the company loaned $2,400 to an employee, who signed a 6% note, due in 6 months. On March 15, the company collected $100 on the account written off one month earlier.

On March 31, the company accrued interest earned on the note.

					Number of Days Unpaid
Customer		Total		0–30			31–60			61–90			Over 90
Alabama Tourism	$	200		$	100		$	80		$	20
Bayside Bungalows		460											$	460
Others (not shown to save space)		18,200			7,400			9,000			1,000			800
Xciting Xcursions		400			400
Total Accounts Receivable	$	19,260		$	7,900		$	9,080		$	1,020		$	1,260
Estimated Uncollectible (%)					2	%		15	%		20	%		40	%

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.

5. What would web Wizard report? _______ . _______ Income from operations

6. what would web wizard report __________ __________ Income from operations

Answer 1

Solution:

АВ АC AD A 21 22 Web Wizard would report: Bad debts expense 23 before Income from operations Income from operations 24 after 25 Interest revenue 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 Sheet202 (6) Sheet299 (5) et793 Sheet794 Sheet755