Accounting for uncollectible accounts: percent of receivables allowance method
Hammond Inc. experienced the following transactions for 2012, its first year of operations:
1.Issued common stock for $80,000 cash.
2.Purchased $225,000 of merchandise on account.
3.Sold merchandise that cost $148,000 for $294,000 on account.
4.Collected $242,000 cash from accounts receivable.
5.Paid $210,000 on accounts payable.
6.Paid $46,000 of salaries expense for the year.
7.Paid other operating expenses of $35,000.
8.Hammond adjusted the accounts using the following information from an accounts receivable aging schedule.
Number of Days Past Due | Amount | Percent Likely to Be Uncollectible | Allowance Balance |
Current | $33,000 | .01 |
|
0–30 | 12,000 | .05 |
|
31–60 | 3,000 | .10 |
|
61–90 | 2,500 | .20 |
|
Over 90 days | 1,500 | .50 |
|
Required
a.Organize the transaction data in accounts under an accounting equation.
b.Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Hammond Inc. for 2012.
c.What is the net realizable value of the accounts receivable at December 31, 2012?
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