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 intrnal 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 $42,000 on credit. b. On January 31, the company estimated bad debts using 1 percent of credit sales. c. On February 4, the company collected $21,000 of accounts receivable d. On February 15, the company wrote off a $200 account receivable e. During February, the company provided services for $32,000 on credit. f On February 28, the company estimated bad debts using 1 percent of credit sales. g. On March 1, the company loaned $2,800 to an employee who signed a 6% note, due in 6 months h. On March 15, the company collected $200 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 $1,220 Number of Days Unpaid Customer Over Total $200 $120 $ 70 $ 10 0-30 31-60 61-90 90 Alabama Tourism Bayside Bungalows Others (not shown to save space 7,500 7,000 8,600 1,200 700 Xciting Xcursions 420 $ 420 380 380 $18,500 $7,500 $8,670 $1,210 $1,120 Total Accounts Receivable Estimated uncollectible (%) 2% 10% 20% 35% 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 a. Accounts Receivable b. C. d. e. 9. h. 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.) Answer is complete but not entirely correct. Transaction General Journal Debit Credit Accounts Receivable 42,000 Service Revenue 42,000 Bad Debt Expense 420 Allowance for Doubtful Accounts 420 Cash 21,000 Accounts Receivable 21,000 4 Allowance for Doubtful Accounts Accounts Receivable 200 Accounts Receivable 32,000 Service Revenue 32,000 Bad Debt Expense 1,017 Allowance for Doubtful Accounts 1,017 9 Note Receivable 2,800 Cash 2,800 8 Accounts Receivable Allowance for Doubtful Accounts 200 h(2) Cash 200 Accounts Receivable 200 10 Interest Receivable Interest Revenue Bad Debt Expense 577 Allowance for Doubtful Accounts 577 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: Accounts Receivable Allowance for Doubtful Accounts Accounts Receivable, Net of Allowance X: This is a numeric cell, so please enter numbers only. Note Receivable Interest Receivable
