Web Wizard Inc has provided information technology services

Web Wizard, Inc. has provided information technology services for several years. The company uses the percentage of credit sales method to estimate bad debts for internal monthly reporting purposes. At the end of each quarter, the company adjusts its records using the aging of accounts receivable method. The company entered into the following partial list of transactions during the first quarter. a. During January, the company provided services for $44,000 on credit. b. On January 31, the company estimated bad debts using 1 percent of credit sales c. On February 4, the company collected $22,000 of accounts receivable d. On February 15, the company wrote off a $150 account receivable e. During February, the company provided services for $34,000 on credit. f On February 28, the company estimated bad debts using 1 percent of credit sales g. On March 1, the company loaned $2,200 to an employee who signed a 6% note, due in 6 months. h. On March 15, the company collected $150 on the account written off one month earlier. i. On March 31, the company accrued interest earned on the note j. On March 31, the company adjusted for uncollectible accounts, based on an aging analysis (below) Allowance for Doubtful Accounts has an unadjusted credit balance of $1,240 Number of Days Unpaid Customer Total $ 230 $ 110 $ 90 $ 30 0-30 31-60 61-90 Over 90 Alabama Tourism Bayside Bungalows Others (not shown to save space) 18,000 7,200 8,800 1,100 900 Xciting Xcursions 440 $ 440 390 390 $19,060 $7,700 $8,890 $1,130 $1,340 Total Accounts Receivable Estimated uncollectible (%) 2% 10% 20% 30%

Solution

Cash

Account Receivables

+22,000

-22,000

Accounts receivable

Allow. for Doubtful Accounts

-150

+150

Cash

Note Receivables

-2.200

+2,200

Accounts Receivables

Allow. for Doubtful Accounts

Cash

Account Receivables

+150

-150

+150

-150

Note :

i.   Interest = $2,200 x 6% x 1/12 = $11

j.

= $ 431 adjustment

  

Accounts Receivables in Balance sheet

Assets:

Current Assets:

Accounts Receivables 19,060

less : Allowance for Doubtful Accounts 1,671 17,389

Note Receivable 2,200

Interest Receivable 11

Provide Feedback.........................

	Assets	Amount	Liabilities + Shareholder\'s Equity	Amount
a.	Accounts Receivables	+44,000	Service Revenue	+44,000
b.	Allow. for doubtful accts	-440	Bad debt expense	-440
c.	Cash Account Receivables	+22,000 -22,000
d.	Accounts receivable Allow. for Doubtful Accounts	-150 +150
e.	Accounts receivable	+34,000	Service revenue	+34,000
f.	Allow. for doubtful Accounts	-340	Bad Debt Expense	-340
g.	Cash Note Receivables	-2.200 +2,200
h.	Accounts Receivables Allow. for Doubtful Accounts Cash Account Receivables	+150 -150 +150 -150
i.	Interest Receivables	+11	Interest Revenue	+11
j.	Allow. for Doubtful Accounts	-431	Bad Debts Expenses	-431