CP8-4 Accounting for Accounts and Notes Receivable Transactions [LO 8-2, LO 8-3]
ID: 2508899 • Letter: C
Question
CP8-4 Accounting for Accounts and Notes Receivable Transactions [LO 8-2, LO 8-3]
[The following information applies to the questions displayed below.]
Execusmart Consultants has provided business consulting 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 January, the company provided services for $300,000 on credit.
On February 28, the company estimated bad debts using 1 percent of credit sales.
On March 1, the company loaned $11,000 to an employee, who signed a 12% note due in 3 months.
On March 31, the company adjusted for uncollectible accounts, based on the following aging analysis. Allowance for Doubtful Accounts has an unadjusted credit balance of $8,000.
For items (a)–(j), analyze the amount and direction (+ or –) of effects on specific financial statement accounts and the overall accounting equation. TIP: In item (j), you must first calculate the desired ending balance before adjusting the Allowance for Doubtful Accounts. (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign.)
Prepare the journal entries for items (a)–(j). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Show how Accounts Receivable, Notes Receivable, and their related accounts would be reported in the current assets section of a classified balance sheet at the end of the quarter on March 31.
Sales Revenue and Service Revenue are two income statement accounts that relate to Accounts Receivable. Name two other accounts related to Accounts Receivable and Note Receivable that would be reported on the income statement and indicate whether each would appear before, or after, Income from Operations for Execusmart Consultants.
Execusmart Consultants has provided business consulting 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.
Explanation / Answer
1.
2.
Balance in Allowance for doubtful accounts = ($41000 x 4%) + ($49800 x 10%) + ($6500 x 20%) + ($8000 x 40%) = 1640 + 4980 + 1300 + 3200 = $11120
3.
4. Sales returns and allowances: Before Income from Operations
Interest revenue: After Income from Operations
No. Assets = Liabilities + Equity Income Statement Accounts Receivable - Allowance for Doubtful Accounts + Notes Receivable + Interest Receivable + Other Assets = + Common Stock Retained Earnings Revenue - Expense = Net Income a 300000 - + + + = + 300000 300000 - = 300000 b - 3000 + + + = + -3000 - 3000 = -3000 c -150000 - + + + 150000 = + - = d -650 - -650 + + + = + - = e 250000 - + + + = + 250000 250000 - = 250000 f - 2500 + + + = + -2500 - 2500 = -2500 g - + 11000 + + -11000 = + - = h(1) 650 - 650 + + + = + - = h(2) -650 - + + + 650 = + - = i - + + 110 + = + 110 110 - = 110 j - 3120 + + + = + -3120 - 3120 = -3120Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.