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Exercise 7-8A (Algo) Accounting for uncollectible accounts: percent of receivables allowance method LO 7-2, 7-3...

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Accounting

Exercise 7-8A (Algo) Accounting for uncollectible accounts: percent of receivables allowance method LO 7-2, 7-3

Vulcan Service Company experienced the following transactions for Year 1, its first year of operations:

  1. Provided $70,000 of services on account.
  2. Collected $42,000 cash from accounts receivable.
  3. Paid $28,000 of salaries expense for the year.
  4. Adjusted the accounts using the following information from an accounts receivable aging schedule:

Number of Days Past Due Amount Percent Likely to Be Uncollectible Allowance Balance
Current $20,720 0.01
0 to 30 1,400 0.05
31 to 60 1,960 0.10
61 to 90 1,680 0.30
Over 90 days 2,240 0.50

Required

  1. Record the given transactions in general journal form and post to T-accounts.
  2. Prepare the income statement for Vulcan Service Company for Year 1.
  3. What is the net realizable value of the accounts receivable at December 31, Year 1? .

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