The following information applies to the questions displayed below.] Web Wizard,
ID: 2410612 • Letter: T
Question
The following information applies to the questions displayed below.] 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 $36,000 on credit. b. On January 31, the company estimated bad debts using 1 percent of credit sales c. On February 4, the company collected $18,000 of accounts receivable d. On February 15, the company wrote off a $200 account receivable e. During February, the company provided services for $26,000 on credit. f On February 28, the company estimated bad debts using 1 percent of credit sales g. On March 1, the company loaned $2,800 to an employee who signed a 6% note, due in 6 months h. On March 15, the company collected $200 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 $1,160 Number of Days Unpaid Customer Total 0-30 31-60 61-90 Over 90 $ 200 $ 120$ 70 $ 10 Alabama Tourism Bayside Bungalows Others (not shown to save space) Xciting Xcursions 360 16,300 380 $ 360 700 6,4008,000 1,200 380 17,240 $6,900 $8,070 $1,210 $1,060 Total Accounts Receivable Estimated uncollectible (%) 2% 10% 20% 35%Explanation / Answer
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Event Assets = Liabilities + Stockholders' Equity a Increase 36000 Increase 36000 Services on account b Decrease -360 Decrease -360 Allowance for doubtful accounts c Increase 18000 Cash receipt Decrease -18000 Reduction in A/R d Decrease -200 Reduction in A/R Increase 200 Reduction in allowance e Increase 26000 26000 Services on account f Decrease -260 Decrease -260 Allowance for doubtful accounts g Decrease -2800 Cash given as a loan Increase 2800 Loan account created h Increase 200 Increase in A/R Decrease -200 Increase in allowance account Increase 200 Cash received Decrease -200 Decrease in A/R i Increase 14 Increase 14 Interest on loan to employee j Decrease -398 Decrease -398 Allowance for doubtful accounts *Related Questions
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