Question

M y account Duke Energy Quizzes & Tests Saved SP Help Save & Tine Tollowing information applies to une questions displayed Derowy Web Wizard, Inc., has provided information technology services for several years. For the first two months of the current year, the company has used the percentage of credit sales method to estimate bad debts. At the end of the first quarter, the company switched to 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 $30,000 on credit b. On January 31, the company estimated bad debts using 1 percent of credit sales. c On February 4, the company collected $15,000 of accounts receivable. d. On February 15, the company wrote off a $200 account receivable. e During February, the company provided services for $20,000 on credit. 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 signeda 6% note, due in 6 months. h. On March 15, the company collected $200 on the account written off ône month earlier. . On March 31, the company accrued interest earned on the note. V. 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 $1,100.

Answer 1

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Web Wizard Inc.
Workings for bad debt and allowance for doubtful accounts:
	Amount $
Services provide in January	30,000.00	A
Allowance for bad debt for January %	1%	B
Allowance for doubtful accounts for January	300.00	C=A*B
Services provide in February	20,000.00	D
Allowance for bad debt for February %	1%	E
Allowance for doubtful accounts for February	200.00	F=D*E
Allowance for Doubtful Accounts that should be at year end:
	H	I	J=H*I
Age Group	Amount $	Uncollectible %	Allowance for Doubtful Accounts
0-30 Days	6,300.00	2%	126.00
31-60 Days	7,470.00	10%	747.00
61-90 Days	1,210.00	20%	242.00
Over 90 days	1,000.00	35%	350.00
	15,980.00		1,465.00
Bad debt expense at year end:
Allowance for Doubtful Accounts	1,465.00	See J
Already in the books	1,100.00	K
Bad debt expense at year end:	365.00	L=J-K
Total Bad debt Expense ($)	865.00	M= C+F+L
Total Service Revenue ($)
Services provide in January	30,000.00	See A
Services provide in February	20,000.00	See D
Total Service Revenue ($)	50,000.00	O = A+D
Balance Sheet
At March 31
Assets	Amount $
Current Assets
Accounts Receivable	15,980.00	See H
Allowance for Doubtful Accounts	1,465.00	See J
Accounts Receivable, Net of Allowance	14,515.00	N= H-J
Income from Operations	Amount $
Service Revenue	50,000.00	See O
Bad debt Expense	865.00	See M
Income from Operations	49,135.00	P=O-M
Interest income will not be included in income from operations because that is non operating Income.