effect of the transaction or adjustment on the appropriate balance sheet category and on net income by entering for each account affected the account name and amount and indicating whether it is an addition (+) or a subtraction (). Transaction a has been done as an illustration. Net income is not affected by every transaction. In some cases only one column may be affected because all of the specific accounts affected by the transaction are included in that category.

1. Accrued interest revenue of $30 on a note receivable.

2. Recorded estimated bad debts in the amount of $775.

3. Wrote off an overdue account receivable of $501.

4. Converted a customer's $1,300 overdue account receivable into a note.

5. Accrued $54 of interest earned on the note (in d).

6. Collected the accrued interest (in e).

7. Recorded $3,400 of sales, 75% of which were on account.

8. Recognized cost of goods sold in the amount of $2,720.