Airdrie Services Inc. started business on March 1, 2014. The company produces monthly financial statements and had total sales of $600,000 (of which $570,000 were on account) during the first four months.

On June 30, the Accounts Receivable account had a balance of $210,000 (no accounts have been written off to date), which was made up of the following accounts aged according to the date the services were provided:

The following accounts receivable transactions took place in July 2014:
Jul. 12 Determined the account of Vesuvus Ltd. was uncollectible and wrote it off.
15 Collected $4,200 from Torrance Trucks for services in the first three months.
21 Decided the account of Lou Del Rio was uncollectible and wrote it off.
24 Collected $6,408 from Mort Black for services in the month of March.
26 Received a cheque from Lou Del Rio for $9,600 plus two cheques, of $9,408 each, post-dated to September 10 and November 10.
31 Total sales of service in the month were $162,000; 90 percent of these were on account and 60 percent of the sales on account were collected in the month.
Required
1. Airdrie Services Inc. has heard that other companies in the industry use the allowance method of accounting for uncollectibles, with many of these estimating the uncollectibles through an aging of accounts receivable.
a. Journalize the adjustments that would have to be made on June 30 (for the months of March through June), assuming the following estimates of uncollectibles:
Age of Accounts Receivable ______________________ Estimated Percent Uncollectible
From current month ..............................................1%
From prior month ................................................3
From two months prior ..........................................6
From three months prior ........................................ 20
From four months prior ........................................ 40
(Round your total estimate to the nearest whole dollar.)
b. Journalize the transactions of July 2014.
c. Journalize the month-end adjustment, using the table that appears in requirement 1a.
2. For the method of accounting for the uncollectibles used above, show
a. The balance-sheet presentation of the accounts receivable.
b. The overall effect of the uncollectibles on the income statement for the months of June and July 2014.

Transcribed Image Text:

Month of Service Customer March June April $ 1,200 1,140 4,464 May $ 1,800 Torrance Trucks Vesuvus Ltd. Lou Del Rio Mort Black Other Accounts Receivable $ 2,520 $ 1,440 4,344 1,500 6,876 6,408 1,632 9,168 12,624 7,908 15,912 57,540 3,468 23,916 14,760 31,380 $34,188 $56,604 $87,144 $32,064