1. Airdrie Service 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 1.

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.

Month of Service

March April May June

Torrance Trucks $2520 $1200 $1800 $1440

Vesuvus Ltd. $1500 $1140 $1632 $4344

Lou Del Rio $6876 $4464 $9168 $7908

Mort Black $6408 $3468 $12624 $15912

Other Accounts Receivable $14760 $23916 $31380 $57540

Total $32064 $34188 $56604 $87144

The following accounts receivable transactions took place in July 2014:

July 12 Determine the account of Vesuvus Ltd. was uncollectible and wrote it off.

July 15 Collect $4200 from Torrance Trucks for services in the first three months.

July 21 Decided the account of Lou Del Rio was uncollectible and wrote it off.

July 24 Collected $6408 from Mort Black for services in the month of March.

July 26 Received a cheque from Lou Del Rio for $9600 plus two cheques, of $9408 each, post-dated to September 10 and November 10.

July 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 collect in the month.