[The following information applies to the questions displayed below.] Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $13. At the start of January 2021, VGC’s income statement accounts had zero balances and its balance sheet account balances were as follows: Cash $ 1,600,000 Accounts Receivable 174,000 Supplies 15,100 Equipment 930,000 Buildings 510,000 Land 2,050,000 Accounts Payable 113,000 Deferred Revenue 74,000 Notes Payable (due 2025) 94,000 Common Stock 2,500,000 Retained Earnings 2,498,100 In addition to the above accounts, VGC’s chart of accounts includes the following: Service Revenue, Salaries and Wages Expense, Advertising Expense, and Utilities Expense. The following transactions occurred during the January month: Received $57,750 cash from customers on 1/1 for subscriptions that had already been earned and charged on account in 2020. Purchased 10 new computer servers for $41,500 on 1/2; paid $11,500 cash and signed a three-year note for the remainder owed. Paid $14,300 for an Internet advertisement that ran today on 1/3. On January 4, purchased and received $5,300 of supplies on account. Received $150,000 cash on 1/5 from customers for service revenue earned but not previously recorded in January. On January 6, paid $5,300 cash for supplies purchased on January 4. On January 7, sold 19,900 subscriptions at $13 each for services provided during January. Half was collected in cash and half was sold on account. Paid $380,000 in wages to employees on 1/30 for work done in January. On January 31, received an electric and gas utility bill for $6,260 for January utility services. The bill will be paid in February. Prepare an Income Statement for the month ended January 31, 2021, using unadjusted balances from part 4.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
[The following information applies to the questions displayed below.]
Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $13. At the start of January 2021, VGC’s income statement accounts had zero balances and its balance sheet account balances were as follows:
| Cash | $ 1,600,000 |
|---|---|
| Accounts Receivable | 174,000 |
| Supplies | 15,100 |
| Equipment | 930,000 |
| Buildings | 510,000 |
| Land | 2,050,000 |
| Accounts Payable | 113,000 |
| Deferred Revenue | 74,000 |
| Notes Payable (due 2025) | 94,000 |
| Common Stock | 2,500,000 |
| 2,498,100 |
In addition to the above accounts, VGC’s chart of accounts includes the following: Service Revenue, Salaries and Wages Expense, Advertising Expense, and Utilities Expense. The following transactions occurred during the January month:
- Received $57,750 cash from customers on 1/1 for subscriptions that had already been earned and charged on account in 2020.
- Purchased 10 new computer servers for $41,500 on 1/2; paid $11,500 cash and signed a three-year note for the remainder owed.
- Paid $14,300 for an Internet advertisement that ran today on 1/3.
- On January 4, purchased and received $5,300 of supplies on account.
- Received $150,000 cash on 1/5 from customers for service revenue earned but not previously recorded in January.
- On January 6, paid $5,300 cash for supplies purchased on January 4.
- On January 7, sold 19,900 subscriptions at $13 each for services provided during January. Half was collected in cash and half was sold on account.
- Paid $380,000 in wages to employees on 1/30 for work done in January.
- On January 31, received an electric and gas utility bill for $6,260 for January utility services. The bill will be paid in February.
- Prepare an Income Statement for the month ended January 31, 2021, using unadjusted balances from part 4.
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