Question

Paragraph Styles Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. (Note that "Not Affected" means that the event does not affect that element of the financial statements or the event causes an increase in that element that is offset by a decrease in the same element.) Increase= Decrease Not Affected - NA 4) On December 31, Year 1, Sparkes Co. estimated it had $12,000 of uncollectible accounts related to credit sales it made during the year. Sparkes, which uses the allowance method, made the necessary adjustment to record this estimate. Staat of Cash Liabilities Stk. Equity Revenues Expenses Net Income Flows 5) Sparkes Company uses the allowance method. On March 31, Year 1, Sparkes wrote-off an account receivable of one of its customers. Assets Stunt of Cash Liabilities Stk. Equity Revenues Expenses Net Income Flows 6) Garrison Company recognized $4,000 of service revenue earned on account. Stmt of Cash Liabilities Stk. Equity Revenues Expenses Net Income Flows Assets 71 In preparing the bank reconciliation for Heath Company, an employee found that the bank

Answer 1

4 assets stk. Equity revenues expenses net income liabilities NA stmt of cash flows NA reason - because allowance for doubtful debt in a contra asset account. Increasing it would mean decreasing assets. D NA 5 assets liabilities stk. Equity revenues expenses net income ΝΑ NA stmt of cash flows NA reason-because setting off accounts receivable with allowance for doubtful debt has NIL impact on total assets. NA NA NA NA | 6 revenues expenses net income assets i liabilities stk. Equity NA stmt of cash flows NA reason - revenue earned on account would increase accounts receivable. NA I working notes - the following journal entries shall be passed - no account titles debit credit 4 $ 12,000 bad debts expense allowance for doubtful debts $ 12,000 5 XXX allowance for doubtful debts accounts receivable XXX 6 $ 4,000 accounts receivable service revenue $ 4,000

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