Demonstration Problem 5-1: Accounting for Uncollectible Receivables The Solo Company was started on January 1, 2018. The following events occurred during 2018 and 2019. 2018 1. Provided $4,000 of services on account. 2. Collected $3,000 cash from accounts receivable. 3. Estimated uncollectible accounts expense to be 1.5 percent of 2018 credit sales. 2019 1. Wrote off $40 of accounts receivable that were deemed uncollectible. 2. Provided $6,500 of services on account. 3. Collected $5,400 cash from accounts receivable. 4. Received $5 from a bad debt that had been previously written off Reinstated the account. 5. Recorded the $5 cash received from the receivable reinstated in Event No. 4. 6. Estimated uncollectible accounts expense to be 1 percent of 2019 credit sales. Required a. Record the events in a statements model under the titles of the affected accounts. Record a zero under each heading not affected by a given event. b. Determine the net realizable value of accounts receivable at the end of each year. Demonstration Problem 5-1: Solution, part a. Statements Model, 2018 Event Rev. - Exp. = Net Inc. Cash Flow No. Beg. Bal Cash + -0- + -0-+ 3,000 + Assets = Liab, + Equity Acet Rec. + (Allow) = Ret Ear. -0- + - - = -0- + -0- 4,000 + -- = -0- + 4,000 (3,000) + -- = -0- + -0- -0- + (60) = -|- + (60) 1,000 + (60) = -0- + 3,940 -0-- -- = -- -O- 4,000 - -0 - = 4,000 -0-- -- = -O- -0-- 60 = (60) 4,000 - 60 = 3,940 - +3,000 OA Totals 3,000 + +3,000 NC Solution, part b. Net Realizable Value, 2018: $1,000 - 60 = $940 2019 Event Assets = babe + Equity Rev. Exp. = Net Inc. Cash Flow No. Cash + Acct. Rec.+ (Allow) = Ret. Ear. Beg. Bal. --- -- = -0- 6,500 - 3,000 + 1,000 + (60) = -0- + 3,940 -O-+ (40) + 40 = -- + - - 0-+ 6,500+ - = -- + 6,500 5,400 + (5,400) + -O-+ 5+ (5) = -0- + -- 5+ (5) + -- = -0- + + -- + (65) = -0- + (65) --- 65 = (65) 6,500 - 65 = 6,435 Totals 8,405 + 2,060 + (90) = -0- + 10,375 +5,405 NC Part B Solution, part b. Net Realizable Value, 2019: $2,060 - 90 = $1,970