Web Wizard, Inc., has provided information technology services for several years. For the first two months of the current year, the company has used the percentage of credit sales method to estimate bad debts. At the end of the first quarter, the company switched to the aging of accounts receivable method. The company entered into the following partial list of transactions during the first quarter. During January, the company provided services for $30,000 on credit. On January 31, the company estimated bad debts using 1 percent of credit sales. On February 4, the company collected $15,000 of accounts receivable. On February 15, the company wrote off a $200 account receivable. During February, the company provided services for $20,000 on credit. On February 28, the company estimated bad debts using 1 percent of credit sales. On March 1, the company loaned $2,800 to an employee, who signed a 6% note, due in 6 months. On March 15, the company collected $200 on the account written off one month earlier. On March 31, the company accrued interest earned on the note. 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 $1,100. Number of Days Unpaid Customer Total 0–30 31–60 61–90 Over 90 Alabama Tourism $ 200 $ 120 $ 70 $ 10 Bayside Bungalows 300 $ 300 Others (not shown to save space) 15,100 5,800 7,400 1,200 700 Xciting Xcursions 380 380 Total Accounts Receivable $ 15,980 $ 6,300 $ 7,470 $ 1,210 $ 1,000 Estimated Uncollectible (%) 2 % 10 % 20 % 35 % Show how Accounts Receivable, Notes Receivable, and their related accounts would be reported in the current assets section of a classified balance sheet at the end of the quarter on March 31. (Do not round intermediate calculations.)
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.]
Web Wizard, Inc., has provided information technology services for several years. For the first two months of the current year, the company has used the percentage of credit sales method to estimate
- During January, the company provided services for $30,000 on credit.
- On January 31, the company estimated bad debts using 1 percent of credit sales.
- On February 4, the company collected $15,000 of accounts receivable.
- On February 15, the company wrote off a $200 account receivable.
- During February, the company provided services for $20,000 on credit.
- On February 28, the company estimated bad debts using 1 percent of credit sales.
- On March 1, the company loaned $2,800 to an employee, who signed a 6% note, due in 6 months.
- On March 15, the company collected $200 on the account written off one month earlier.
- On March 31, the company accrued interest earned on the note.
- 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 $1,100.
| Number of Days Unpaid | ||||||||||||||||
| Customer | Total | 0–30 | 31–60 | 61–90 | Over 90 | |||||||||||
| Alabama Tourism | $ | 200 | $ | 120 | $ | 70 | $ | 10 | ||||||||
| Bayside Bungalows | 300 | $ | 300 | |||||||||||||
| Others (not shown to save space) | 15,100 | 5,800 | 7,400 | 1,200 | 700 | |||||||||||
| Xciting Xcursions | 380 | 380 | ||||||||||||||
| Total Accounts Receivable | $ | 15,980 | $ | 6,300 | $ | 7,470 | $ | 1,210 | $ | 1,000 | ||||||
| Estimated Uncollectible (%) | 2 | % | 10 | % | 20 | % | 35 | % | ||||||||
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Show how Accounts Receivable, Notes Receivable, and their related accounts would be reported in the current assets section of a classified balance sheet at the end of the quarter on March 31. (Do not round intermediate calculations.)
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