Please review slides 36 and 37. For financial accounting purposes (not tax) show Hawthornes 2021 net income and prepare a basic income statement.

Slide 36: Hawthorne Manufacturing Company started operations in 2021. It had sales of $1,200,000 and collections of $895,000, leaving a balance of $305,000 in accounts receivable as of December 31, 2021.

Accounts Receivable
1/1/2021		0
Sales		1,200,000
Collections					895,000
12/31/2021		305,000

Slide 37: Recognizing allowance for uncollectible accounts

At the end of 2021, Hawthornes analysis indicates it expects to collect $280,000 of its accounts receivable, so it must establish an allowance for uncollectible accounts of $25,000 ($305,000 280,000).

Journal Entry	Debit	Credit
Bad debt expense	25,000
Allowance for uncollectible accounts		25,000

Allowance for Uncollectible Accounts
1/1/2021	0
Bad debtexpense	25,000
12/31/2021	25,000