Question

Roth Service Co. experienced the following transactions for Year 1, its first year of operations: 1. Provided $110,000 of services on account. 2. Collected $89,000 cash from accounts receivable. 3. Paid $41,000 of salaries expense for the year. 4. Roth adjusted the accounts using the following information from an accounts receivable aging schedule: Allowance Balance Number of Days Past Due Current 0-30 31-60 61-90 Over 90 days Amount $9,500 4,000 2,500 2,000 3,000 Percent Likely to Be Uncollectible 0.01 0.05 . 10 0.30 0.50 Required a. Organize the transaction data in accounts under an accounting equation. b. Prepare an income statement for Roth Service Co. for Year 1. c. What is the net realizable value of the accounts receivable at December 31, Year 1? Complete this question by entering your answers in the tabs below. Required A Required B Required c Organize the transaction data in accounts under an accounting equation. (Enter any decreases to account balances with a minus sign. If there is no effect on the Accounts Titles for Retained Earnings, leave the cell blank. Not all cells will require entry.) ROTH SERVICE CO. Horizontal Statements Model Assets Equity Event Cash NRV Accounts Liabilities - Retained Accounts Titles for Retained Earnings < Prev 3 of 8 Next >

Answer 1

Solution: A

Below is the transaction data in accounting equation

ROTH SERVICE CO. Horizontal Statements Modal Assets Equity Account titles for Event NRV Accounts Liabilities + Retained Cash + Retained earning Receivables Earning 1 + 110,000 = + 110,000 Service revenue 2 89,000 + -89000/= + 3 -41,000+ + -41,000 Salary expense 4 + -2,645 = -2645 Bad debts expense Bal. 48000 + 18355/= + 66355 = +

Working:

Below is the calculation of bad debt expense:

Working Number of Days past due Amount % likely to be uncollected Allowance balances current $9,500 0.01 $95 0-30 Days $4,000 0.05 $200 31-60 Days $2,500 0.1 $250 61-90 Days $2,000 0.3 $600 Over 90 Days $3,000 0.5 $1,500 $2,645

Solution: B

Below is the Income statement for Roth co.

ROTH SERVICE CO. Income statement For the year ended December 31, Year 1 110,000 Service revenue Operating expenses Salary expense Bad debts expense 41,000 2645 Total operating expense Net income 43,645 66,355

Solution: C

Net Realizable Value:

Net Realizable Value $18,355 Working Amount 110000 -89000 Service on Account Less: Cash Collected Less: Bad debt Expense Net Realizable Value -2645 18355