Question

Web Wizard, Inc. has provided information technology 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 the first quarter.
a. During January, the company provided services for $38,000 on credit.
b. On January 31, the company estimated bad debts using 1 percent of credit sales.
c. On February 4, the company collected $19,000 of accounts receivable
d. On February 15, the company wrote off a $100 account receivable
e. During February, the company provided services for $28,000 on credit
f. On February 28, the company estimated bad debts using 1 percent of credit sales
g. On March 1, the company loaned $2,400 to an employee who signed a 6% note, due in 6 months.
h. On March 15, the company collected $100 on the account written off one month earlier
i. On March 31, the company accrued interest earned on the note
j. On March, the company adjusted for uncollectible accounts, based on an aging analysis (below).
Allowance for Doubtful Accounts has an unadjusted credit balance of $1,180.
Number of Days Unpaid Items
Customer Total 0-30 31-60 61-90 Over 90
Alabama Tourism $200 $100 $80 20
Bayside Bungalows 380 $380
Others (not shown to save space) 16,600 6,600 8,200 1,000 800
Xciting Xcursions 400 400
Total Accounts Receivable $17,580 $7,100 $8,280 $1,020 $1,180
Estimated uncollectible (%) 2% 15% 20% 40%
Required
1. For items (a)-(j), analyze the amount and direction (+ or -) of effects on specific financial statement accounts and the overall accounting equations. (Enter any decreases to account balances with a minus sign)

Answer 1

Answer:

Explanation:

Assets = Liabilities + Stockholders' Equity

A.) Accounts Receivable +38,000 ; Service Revenue +38,000

b.) Allowance for Doubtful Accounts −380 Bad Debt Expense −380

c.) Cash +19,000

Accounts Receivable −19,000

d.) Accounts Receivable −100

Allowance for Doubtful Accounts +100

e.) Accounts Receivable +28,000 Service Revenue +28,000

f.) Allowance for Doubtful Accounts −280 Bad Debt Expense −280

g.) Cash −2,400

Note Receivable +2,400

h.) Accounts Receivable + 100

Allowance for Doubtful Accounts −100

Cash +100

Accounts Receivable −100

i.) Interest Receivable +12 Interest Revenue +12

j. Allowance for Doubtful Accounts − 814