PA8-4 Accounting for Accounts and Notes Receivable Transactions [LO 8-2, LO 8-3] [The following information applies to the questions displayed below.] Web Wizard, Inc. has provided information technology services for several years. The company uses the percentage of credit sales method to estimate bad debts for internal monthly reporting purposes. At the end of each quarter, the company adjusts its records using the aging of accounts receivable method. The company entered into the following partial list of transactions during the first quarter a. During January, the company provided services for $46,000 on credit. b. On January 31, the company estimated bad debts using 1 percent of credit sales c. On February 4, the company collected $23,000 of accounts receivable d. On February 15, the company wrote off a $100 account receivable e. During February, the company provided services for $36,000 on credit. f On February 28, the company estimated bad debts using 1 percent of credit sales g. On March 1, the company loaned $2,400 to an employee who signed a 6% note, due in 6 months h. On March 15, the company collected $100 on the account written off one month earlier. i. On March 31, the company accrued interest earned on the note j. On March 31, the company adjusted for uncollectible accounts, based on an aging analysis (below) Allowance for Doubtful Accounts has an unadjusted credit balance of $1,260 Number of Days Unpaid Total0-30 31-60 61-90 Over 90 $ 200 $ 100 $ 80 $ 20 Customer Alabama Tourism Bayside Bungalows Others (not shown to save space) 18,200 7,4009,000 000800 Xciting Xcursions 460 $ 460 400 40o $19,260 $7,900 $9,080 $1,020 $1,260 Total Accounts Receivable Estimated uncollectible (%) 2% 15% 20% 40% PA8-4 Part 1 Required 1. For items (a)-), analyze the amount and direction (+ or - of effects on specific financial statement accounts and the overall accounting equation. (Enter any decreases to account balances with a minus sign) Assets Liabilities + Stockholders' Equity c. PA8-4 Part 2 2. Prepare the journal entries for items (a)-). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet 2 3 4 6 7 Record service revenue of $46,000 sold on account during January. Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry Clear entry View general journal 3. 2.50 points PA8-4 Part 3 3. Show how Accounts Receivable, Notes Receivable, and their related accounts would be reported in the current assets section of a classified balance sheet. WEB WIZARD, INC Partial Balance Sheet At March 31 Assets Current Assets: 4. value: 2.50 points PA8-4 Part 4 4. Sales Revenue and Service Revenue are two income statement accounts that relate to Accounts Receivable. Name two other accounts related to Accounts Receivable and Notes Receivable that would be reported on the income statement and indicate whether each would appear before, or after, Income from Operations. Web Wizard would report Income from Operations Income from Operations
