Question

Vulcan Service Co. experienced the following transactions for Year 1, its first year of operations: Provided $82,000 of services on account. Collected $49,200 cash from accounts receivable. Paid $30,000 of salaries expense for the year. Adjusted the accounts using the following information from an accounts receivable aging schedule: Number of Days Past Due Amount Percent Likely to Be Uncollectible Allowance Balance Current $ 24,272 .01 0-30 1,640 .05 31-60 2,296 .10 61-90 1,968 .30 Over 90 days 2,624 .50 Required a. Record the above transactions in general journal form and post to T-accounts. b. Prepare the income statement for Vulcan Service Co. for Year 1. c. What is the net realizable value of the accounts receivable at December 31, Year 1

Answer 1

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