Problem 7-20A Accounting for uncollectible accounts: percent of receivables allowance method 7-3 [The following information applies to the questions displayed below.) Roth Inc, experienced the following transactions for Year 1, its first year of operations: 1. Issued common stock for $80,000 cash. 2. Purchased $230,000 of merchandise on account 3. Sold merchandise that cost $150,000 for $298,000 on account. 4. Collected $248,000 cash from accounts receivable. 5. Paid $215,000 on accounts payable. 6. Paid $64,000 of salaries expense for the year. 7. Paid other operating expenses of $53,000. 8. Roth adjusted the accounts using the following information from an accounts receivable aging schedule: Allowance Balance Number of Days Past Due Current 0-30 31-60 61-90 Over 90 days Amount $30,000 12,500 2,500 2,500 2,500 Percent Likely to Be Uncollectible 0.01 0.05 0.10 8.20 0.50 Problem 7-20A Part b b. Prepare the income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows for Roth Inc. for Year 1. (Statement of Cash Flows and Balance Sheet only: Items to be deducted must be indicated with a minus sign.) ROTH, INC. Income Statement For the Year Ended Year 1 Sales revenue Cost of goods sold $ 298,000 150,000 148,000 $ Operating expenses Salaries expense Operating expenses Uncollectible accounts expense 64,000 53,000 2,925 Total operating expenses Net Income 119.925 $ 28,075 ROTH, INC. Statement of Changes in Stockholders' Equity For the Year Ended Year 1 Beginning common stock Plus: Stock issued 80,000 Ending common stock $ 80,000 Beginning retained earnings $ 51,925 Plus: Net income Ending retained earnings 51,925 Total stockholders' equity $ 131,925 EA Balance Sheet As of Year 1 Assets $ 80,000 $ Cash Accounts receivable Less: Allowance for doubtful Accounts Merchandise inventory Total assets Liabilities 50,000 2,925 52,925 $ 132,925 Stockholders' equity Total stockholders' equity Total liabilities and stockholders' equity 0 $ 0 ROTH, INC. Statement of Cash Flows For the Year Ended Year 1 Cash flow from operating activities Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities: $ 0 Net cash flows from financing activities Net change in cash 0 0 Ending cash balance CA $ 5. Paid $215,000 on accounts payable. 6. Paid $64,000 of salaries expense for the year. 7. Paid other operating expenses of $53,000. 8. Roth adjusted the accounts using the following information from an accounts receivable aging schedule Allowance Balance Number of Days Past Due Current 0-3e 31-60 61-90 Over 90 days Amount $30,000 12,500 2,500 2,500 2,500 Percent Likely to Be Uncollectible 0.01 0.05 0.10 @.20 @.50 Problem 7-20A Part c c. What is the net realizable value of the accounts receivable at December 31, Year 1? Net realizable value Problem 7-20A Accounting for uncollectible accounts: percent of receivables allowance method LO 7-2, 7-3 [The following information applies to the questions displayed below) Roth Inc. experienced the following transactions for Year 1, its first year of operations: 1. Issued common stock for $80,000 cash. 2. Purchased $230,000 of merchandise on account. 3. Sold merchandise that cost $150,000 for $298,000 on account. 4. Collected $248,000 cash from accounts receivable. 5. Paid $215,000 on accounts payable, 6. Paid $64,000 of salaries expense for the year. 7. Paid other operating expenses of $53,000 8. Roth adjusted the accounts using the following information from an accounts receivable aging schedule: Allowance Balance Number of Days Past Due Current 8-30 31-60 61-90 Over 90 days Amount $30,000 12,500 2,500 2,500 2,500 Percent likely to Be Uncollectible 0.01 0.05 0.10 0.20 0.50
