Workshop Three Assignment Questions 11 14 of 15 Problem 523

Workshop Three Assignment Questions 11- 14 (of 15) Problem 5-23 Accounting for uncollectible accounts-two cycles using the per The following information applies to the questions displayed below The following transactions apply to Expert Consulting for 2014, the first year of operation 1. Recognized $70,000 of service revenue eaned on account 2. Collected $62,000 from accounts receivable. 3. Adjusted accounts to recognize uncollectible accounts expense. Expert uses the allowance method of accounting for uncollectible accounts and estimates that uncollectuible accounts expense will be 2 percent of sales on account The following transactons apply to Expert Consulting for 2015 1 Recognized $84,000 of service revenue on account 2. Collected $70,000 from accounts receivable Determined that $1,100 of the accounts receivable were uncollectible and wrote them off 4. Collected $200 of an account that hed been previously written oft 5. Pald $51,200 cash for operating expenses. 6. Adjusted accounts to recognize uncollectible accounts expense for 2015. Expert esbmates that uncollectible accounts expense will be 1 percent of soles on account. Required Cmn ere uienngteoureoments for 2014 and 2o15 Complete l recurements for 2014 prior to beginning the requirements for 2015 References Section Break Problem 5-23 Accounting for uncollectible occounts two cycles using the percent of revenue

Solution

a Date Account Titles Debit Credit 2014 1 Accounts Receivable 70,000 Service Revenue 70,000 2 Cash 62,000 Accounts Receivable 62,000 3 Bad Debts Expense* 1,400 Allowance for Doubtful Accounts 1,400 *$70,000 x 2% = $1,400 Date Account Titles Debit Credit 2015 1 Accounts Receivable 84,000 Service Revenue 84,000 2 Cash 70,000 Accounts Receivable 70,000 3 Allowance for Doubtful Accounts 1,100 Accounts Receivable 1,100 4a Accounts Receivable 200 Allowance for Doubtful Accounts 200 4b Cash 200 Accounts Receivable 200 5 Operating Expenses 51,200 Cash 51,200 6 Bad Debts Expense* 840 Allowance for Doubtful Accounts 840 *$84,000 x 1% = $840 b No. Assets = Liab. + S. Equity Rev. - Exp. = Net Inc. Cash Flows 2014 1 + NA + + NA + NA 2 +- NA NA NA NA NA + OA 3 - NA - NA + - NA 2015 1 + NA + + NA + NA 2 +- NA NA NA NA NA + OA 3 +- NA NA NA NA NA NA 4a.* +- NA NA NA NA NA NA 4b. +- NA NA NA NA NA + OA 5 - NA - NA + - - OA 6 - NA - NA + - NA *Transaction 4a is the reinstatement of the previously written-off account; 4b is the collection of the account.