Chapter 7 Accounting for Bad Debts Problem 7-1 - Accounting for Bad Debts ...
50.1K
Verified Solution
Link Copied!
Question
Accounting
Chapter 7 Accounting for Bad Debts Problem 7-1 - Accounting for Bad Debts
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% 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% of 2011 credit sales.
Required
a. Record the events in T-accounts, including closing the revenue and expense accounts to retained earnings.
b. Record the events using the horizontal financial statements model under the titles of the affected accounts. Record a zero under each heading not affected by a given event. Compare the final balances in the T-accounts from Part a with the ending balances in the horizontal financial statements model.
Problem 7-1 Workpaper, part a. T-accounts, 2010
|
| Ledger T-Accounts |
| |||||||
|
|
|
|
|
|
|
| |||
|
| Cash |
| Liabilities |
| Retained Earnings |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
| Bal. 3,000 |
|
|
|
|
|
| 3,940 Bal. |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts Receivable |
|
|
|
| Services Revenue |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| Bal. 1,000 | 960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Allow. for Doubt. Accts. |
|
|
|
| Bad Debts Expense |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| 60 Bal. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Problem 7-1 Workpaper, part b. Horizontal Financial Statements Model, 2010
| Event |
| Assets | = | Liab. | + | Equity |
| Rev. |
| Exp. | = | Net Inc. |
| Cash Flow |
| ||||
| No. |
| Cash | + | Accts. Rec. | + | (Allow.) | = |
|
| Ret. Earn. |
|
|
|
|
|
|
|
|
|
| Beg. bal. |
| 0 | + | 0 | + | 0 | = | 0 | + | 0 |
| 0 |
| 0 | = | 0 |
| 0 |
|
| 1. |
| 0 | + |
| + |
| = |
| + |
|
|
|
|
| = |
|
|
|
|
| 2. |
|
| + |
| + |
| = |
| + |
|
|
|
|
| = |
|
|
|
|
| 3. |
|
| + |
| + |
| = |
| + |
|
|
|
|
| = |
|
|
|
|
| Totals |
| 3,000 | + | 1,000 | + | (60) | = | 0 | + | 3,940 |
| 4,000 |
| 60 | = | 3,940 |
| 3,000 NC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Problem 7-1 Workpaper, part a. T-accounts, 2011
|
| Ledger T-Accounts |
| |||||||
|
|
|
|
|
|
|
| |||
|
| Cash |
| Liabilities |
| Retained Earnings |
| |||
|
| Bal. 3,000 | 0 |
|
|
|
|
| 3,940 Bal. |
|
|
|
|
|
|
|
|
| 0 |
|
|
|
|
|
|
|
|
|
| 0 | 10,375 |
|
|
| Bal. 8,405 | 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts Receivable |
|
|
|
| Services Revenue |
| ||
|
| Bal. 1,000 |
|
|
|
|
|
|
|
|
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Bal. 2,060 | 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Allow. for Doubt. Accts. |
|
|
|
| Bad Debts Expense |
| ||
|
|
| 60 Bal. |
|
|
|
|
|
|
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 0 | 90 Bal. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Problem 7-1 Workpaper, part b. Statements Model, 2011
| Event |
| Assets | = | Liab. | + | Equity |
| Rev. |
| Exp. | = | Net Inc. |
| Cash Flow |
| ||||
| No. |
| Cash | + | Accts. Rec. | + | (Allow.) | = |
|
| Ret. Earn. |
|
|
|
|
|
|
|
|
|
| Beg. bal. |
| 3,000 | + | 1,000 | + | (60) | = | 0 | + | 3,940 |
| 0 |
| 0 | = | 0 |
| 0 |
|
| 1. |
|
| + |
| + |
| = |
| + |
|
|
|
|
| = |
|
|
|
|
| 2. |
|
| + |
| + |
| = |
| + |
|
|
|
|
| = |
|
|
|
|
| 3. |
|
| + |
| + |
| = |
| + |
|
|
|
|
| = |
|
|
|
|
| 4. |
|
| + |
| + |
| = |
| + |
|
|
|
|
| = |
|
|
|
|
| 5. |
|
| + |
| + |
| = |
| + |
|
|
|
|
| = |
|
|
|
|
| 6. |
|
| + |
| + |
| = |
| + |
|
|
|
|
| = |
|
|
|
|
| Totals |
| 8,405 | + | 2,060 | + | (90) | = | 0 | + | 10,375 |
| 6,500 |
| 65 | = | 6,435 |
| 5,405 NC |
|
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.