Accounting for uncollectible accounts: percent of receivables allowance method
King Service Co. experienced the following transactions for 2012, its first year of operations:
1.Provided $66,000 of services on account.
2.Collected $42,000 cash from accounts receivable.
3.Paid $26,000 of salaries expense for the year.
4.King 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 | $16,000 | .01 |
|
0–30 | 3,000 | .05 |
|
31–60 | 2,000 | .10 |
|
61–90 | 1,000 | .30 |
|
Over 90 days | 2,000 | .50 |
|
Required
a.Organize the information in accounts under an accounting equation.
b.Prepare the income statement for King Service Co. for 2012.
c.What is the net realizable value of the accounts receivable at December 31, 2012?
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