Save & Exit Problem 7-18A Determining account balances and preparing journal entries: percent of revenue allowance method of accounting for uncollectible accounts LO 7-1 During the first year of operation, Year 1, Direct Service Co. recognized $340,000 of service revenue on account. At the end of Year 1 the accounts receivable balance was $66,836. For this first year in business, the owner believes uncollectible accounts expense will be about 7 percent of sales on account. Required a. What amount of cash did Direct Service collect from accounts receivable during Year 1? b. Assuming Direct Service uses the allowance method to account for uncollectible accounts, what amount should Direct Service record as uncollectible accounts expense for Year 1? c. Prepare the general Journal entries to (1) Record service revenue on account (2) Record collections from accounts receivable. (3) Record the entry to recognize uncollectible accounts expense. d. What is the net realizable value of receivables at the end of Year 1? e. Show the effects of the transactions listed in Requirement con the financial statements by recording the appropriate amounts in horizontal statements model like the one shown next. When you record amounts in the Cash Flow column, indicate whether the item is on operating activity (OA). Investing activity (A), or financing activity (FA). The letters NA indicate that an element is not affected by the event d. What is the net realizable value of receivables at the end of Year 1? e. Show the effects of the transactions listed in Requirement con the financial statements by recording the appropriate amounts horizontal statements model like the one shown next. When you record amounts in the Cash Flow column, indicate whether the an operating activity (OA), Investing activity (A), or financing activity (FA). The letters NA indicate that an element is not affected by event. Colaplete this question by entering your answers in the tabs below. Reg A and B Reqc Reg D ReqE What amount of cash did Direct Service collect from accounts receivable during Year 17 Assuming Direct Service uses the allowance method to account for uncollectible accounts, what amount should Direct Service record as uncollectible accounts expense for Year 17 Cash collected Uncollectible accounts expense Rege> View transaction list Journal entry worksheet A B > Record service revenue on account. Note: Enter debits before credits Events General Journal Debit Credit 1 Record entry Clear entry View general journal Bock Complete this question by entering your answers in the tabs below. Reg A and B Reqc Reg D RegE What is the net realizable value of receivables at the end of Year 1? Not realizable value Show the effects of the transactions listed in Requirement con the financial statements by recording the appropriate amounts in a horizontal statements modeli record amounts in the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The letters NA it affected by the event. (Enter any decreases to account balances with a minus sign.) Event DIRECT SERVICE COMPANY Effect of Events on the Financial Statements for Yoar 1 Liabilities Equity Revenue Expenses Retained - Allowances Earnings - Net Income Assets Accounts Receivable Cash Flows Cash 1 2 3 Totais + O 0 =
