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g Vulcan Service Co. experienced the following transactions for Year 1, its first year of operations: Provided $91,000 of services on account. Collected $72,000 cash from accounts receivable. Paid $36,000 of salaries expense for the year. 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 $ 7,800 0.01 0-30 4,500 0.05 31-60 2,000 0.10 61-90 2,200 0.20 Over 90 days 2,500 0.50 Required a. Record the above transactions in general journal form and post to T-accounts. b. Prepare the income statement for Vulcan Service Co. for Year 1. c. What is the net realizable value of the accounts receivable at December 31, Year 1

Answer :

jepessoa

Answer:

Provided $91,000 of services on account.

Collected $72,000 cash from accounts receivable.

Paid $36,000 of salaries expense for the year.

Adjusted the accounts using the following information from an accounts receivable aging schedule:

Number of days     Amount    % Likely to be uncollectible        $

Current                   $7,800               0.01                                   $78

0-30                       $4,500               0.05                                $225

31-60                      $2,000               0.10                                $200

61-90                      $2,200              0.20                                 $440

Over 90                 $2,500              0.50                               $1,250

totals                     $19,000                                                     $2,193

a) Provided $91,000 of services on account.

Dr Accounts receivable 91,000

    Cr Service revenue 91,000

Collected $72,000 cash from accounts receivable.

Dr Cash 72,000

    Cr Accounts receivable 72,000

Paid $36,000 of salaries expense for the year.

Dr Wages expense 36,000

    Cr Cash 36,000

Allowance for doubtful accounts

Dr Bad debt expense 2,193

    Cr Allowance for doubtful accounts 2,193

Cash

debit                credit

72,000

                        36,000

36,000

Accounts receivable

debit                credit

91,000

                        72,000

19,000

Allowance for doubtful accounts

debit                credit

                        2,193

Service revenue

debit                credit

                        91,000

Wages expense

debit                credit

36,000

Bad debt expense

debit                credit

2,193

b) Vulcan Service Co.

Income Statement

For the year ended December 31, year 1

Revenue                                   $91,000

Expenses:

Wages expense $36,000

Bad debt expense $2,193      ($38,193)

Net income                              $52,807

c) net realizable value of accounts receivable = $19,000 - $2,193 = $16,807

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