Question

The following events occur for Morris Engineering during 2021 and 2022, its first two years of operations. February 2, 2021 Provide services to customers on account for $26,000. July 23, 2021 Receive $17,000 from customers on account. December 31, 2021 Estimate that 20% of uncollected accounts will not be received. April 12, 2022 Provide services to customers on account for $39,000. June 28, 2022 Receive $6,000 from customers for services provided in 2021. September 13, 2022 Write off the remaining amounts owed from services provided in 2021. October 5, 2022 Receive $35,000 from customers for services provided in 2022. December 31, 2022 Estimate that 20% of uncollected accounts will not be received.

Answer 1

Answer:

See explanation section.

Explanation:

Requirement 1

February 2 2021  Account receivable debit    $26,000

                             Service revenue     credit                         $26,000

Note: To record the sale on the account.

July 23, 2021        Cash                        debit                  $17,000

                      Account receivable       credit                 $17,000

Note: To record the receive from customers.

December 31, 2021  Bad debt expense     debit        $1,800

                                 Allowance for Bad debt credit           $1,800

Note: [($26,000 - $17,000) × 20%] = $1,800.

Assuming the company uses the allowance method.

Requirement 2

April 12, 2022 Account receivable debit    $39,000

service revenue credit                                             $39,000

Note: To record the sale on the account.

June 28, 2022 Cash debit                              $6,000

Account receivable credit                                        $6,000

Note: To record the receive from customers.

September 13, 2022 Bad debt expense debit  $3,000

Account receivable credit                                         $3,000

Calculation: Remaining amount that cannot be received = ($26,000 - $17,000 - $6,000) = $3,000

October 5, 2022 Cash debit                               $35,000

Account receivable credit                                         $35,000

Note: To record the receive from customers.

December 31, 2021  Bad debt expense   debit $800

                              Allowance for Bad debt credit    $800

Calculation: [($39,000 - $35,000) × 20%] = $800