Answer:
Vulcan Service Co.
a. Journal Entries:
Debit Accounts Receivable $82,000
Credit Service Revenue $82,000
To record services rendered on account.
Debit Cash $49,200
Credit Accounts Receivable $49,200
To record cash collected on account.
Debit Salaries Expense $30,000
Credit Cash $30,000
To record salaries expense for the year.
2. Debit Bad Debts Expense $2,456.72
Credit Allowance for Uncollectible $2,456.72
To record bad debts expense.
b. Income Statement for year ended December 31, Year 1:
Service Revenue $82,000
Salaries Expense 30,000
Bad Debts expense 2,456.72 32,456.72
Net income $49,543.28
c. The net realizable value of the accounts receivable at December 31, Year 1 is:
Accounts Receivable = $32,800
less Allowance for
uncollectibles 2,456.72
Net realizable value = $30,343.28
Explanation:
a) Data and Calculations:
Accounts Receivable
Account Titles Debit Credit
Service Revenue $82,000
Cash $49,200
Balance 32,800
Service Revenue
Account Titles Debit Credit
Accounts receivable $82,000
Salaries Expense
Account Titles Debit Credit
Cash $30,000
Bad Debts Expense
Account Titles Debit Credit
Allowance for Collectibles $2,456.72
Allowance for Uncollectibles
Account Titles Debit Credit
Bad Debts expense $2,456.72
Cash Account
Account Titles Debit Credit
Accounts receivable $49,200
Salaries expense $30,000
Balance 19,200
Trial Balance as at Year 1:
Account Titles Debit Credit
Cash $19,200
Accounts Receivable 32,800
Allowance for Uncollectibles $2,456.72
Service Revenue 82,000
Salaries Expense 30,000
Bad Debts expense 2,456.72
Totals $84,456.72 $84,456.72
Accounts receivable aging schedule:
Number of Percent Likely to
Days Past Due Amount Be Uncollectible Allowance Balance
Current $ 24,272 .01 $242.72
0-30 1,640 .05 82.00
31-60 2,296 .10 229.60
61-90 1,968 .30 590.40
Over 90 days 2,624 .50 1,312.00
Total $32,800 $2,456.72
