Determining account balances: allowance method of accounting for uncollectible accountsDur...

Determining account balances: allowance method of accounting for uncollectible accounts

During the first year of operation, 2012, Coggins Repair Co. recognized $400,000 of service revenue on account. At the end of 2012, the accounts receivable balance was $68,000. For this first year in business, the owner believes uncollectible accounts expense will be about 1 percent of sales on account.

Required

a.What amount of cash did Coggins collect from accounts receivable during 2012?

b.Assuming Coggins uses the allowance method to account for uncollectible accounts, what amount should Coggins record as uncollectible accounts expense for 2012?

c.What is the net realizable value of receivables at the end of 2012?

d.Show the effects of the above transactions on the financial statements by recording the appropriate amounts in 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 for not affected.