TEST #2 BUSI 2033 A2 and B2 (Chapters 7-9) Winter 2018 QUESTION 1 (12 marks) Con

Question

TEST #2 BUSI 2033 A2 and B2 (Chapters 7-9) Winter 2018 QUESTION 1 (12 marks) Consulting Services Inc., has been in business for several years On its December 31, 2017 Statement of Financial Position, the company reported an a $500,000 for Accounts Receivable and $20,000 for Allowance for Doubtful Accounts. mount of The company entered into the following selected transactions during January, 2018 On January 5, the company had service revenue of $700,000 on credit. On January 14, the company collected $390,000 of accounts receivable. On January 20, the company wrote off $25,000 of accounts receivable. On January 28, the company collected $10,000 on an account written off in 2017 On January 31, the company adjusted for uncollectable accounts, based on an aging analysis (below). 196 uncollectibl 1096 uncollectibl 2096 uncollectibl 4096 uncollectibl $700 Current 31-60 days 61-90 days 91 and up 40,0 20, 25, REQUIRED: urnal entries for all of the transactions and adjustments for January, 2018. financial position at January 31, 2018, to present Accounts

Explanation / Answer

Journal Entries Date Account Titles Debit Credit Jan.5 Accounts Receivables $700,000.00 Service Revenue $700,000.00 Jan.14 Cash $390,000.00 Accounts Receivables $390,000.00 Jan.20 Allowance for Doubtful accounts $25,000.00 Accounts Receivables $25,000.00 Jan.28 Accounts Receivables $10,000.00 Allowance for Doubtful accounts $10,000.00 Jan.28 Cash $10,000.00 Accounts Receivables $10,000.00 Jan.31 Bad debt Expense $20,000.00 Allowance for Doubtful accounts $20,000.00 Calculation of uncollectable account balance Current = $700000 * 1% $7,000.00 31-60 days = $40000 * 10% $4,000.00 61-90 days = $20000 * 20% $4,000.00 91 and up = $25000 * 40% $10,000.00 Uncollectible Account Balance $25,000.00 Calculation of bad debt expense Uncollectible account balance required $25,000.00 Add : Accounts receivable written off $25,000.00 Less : Uncollectible Account balance at the beginning $20,000.00 Less : Accounts receivable reinstated $10,000.00 Bad debt expense to be booked for the year $20,000.00

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