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BB-Handout_5-Chapter 5

# BB-Handout_5-Chapter 5 - Handout#5-Chapter 5 Demonstration...

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Handout #5-Chapter 5 Demonstration Problem 5-1: Accounting for Uncollectible Receivables The Solo Company was started on January 1, 2010. The following events occurred during 2010 and 2011. 2010 1. Provided \$4,000 of services on account. 2. Collected \$3,000 cash from accounts receivable. 3. Estimated uncollectible accounts expense to be 1.5 percent of 2010 credit sales. 2011 1. Wrote off \$40 of accounts receivable that were deemed uncollectible. 2. Provided \$6,500 of services on account. 3. Collected \$5,400 cash from accounts receivable. 4. Received \$5 from a bad debt that had been previously written off. Reinstated the account. 5. Recorded the \$5 cash received from the receivable reinstated in Event No. 4. 6. Estimated uncollectible accounts expense to be 1 percent of 2011 credit sales. Required a. Record the events in a statements model under the titles of the affected accounts. Record a zero under each heading not affected by a given event. b. Determine the net realizable value of accounts receivable at the end of each year. 5-1

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Demonstration Problem 5-1: Work Paper, part a. Statements Model, 2010 Event Assets = Liab. + Equity Rev. Exp. = Net Inc. Cash Flow No. Cash + Acct. Rec. + (Allow) = Ret. Ear. Beg. Bal. -0- + -0- + -0- = -0- + -0- -0- -0- = -0- -0- 1. + + = + = 2. + + = + = 3. + + = + = Totals 3,000 + 1,000 + (60) = -0- + 3,940 4,000 60 = 3,940 +3,000 NC Demonstration Problem 5-1: Work Paper, part a.
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