Brief Exercise 7-1 (Algo) Analyzing financial statement effects of accounting for uncollectible accounts using the percent of revenue allowance method LO 7-1 CB Winter Sports specializes in providing ski lessons to beginners. The company uses the allowance method to account for uncollectible accounts expense. CB Sports experienced the following four accounting events in Year 1: 1. Recognized $278,000 of revenue on account. 2. Collected $138,000 cash from accounts receivable. 3. Wrote off uncollectible accounts of $2,900. 4. Recognized uncollectible accounts expense. CB estimated that uncollectible accounts expense will be 3 percent of sales on account Required: Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record the amounts of the events into the model. The first transaction is shown as an example Note: In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, and NC for net change in cash. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells require on input-leave cells blank if there is no corresponding input needed. Assets Balance Sheet Liabilities Income Statement Stockholders' Equity Event Number Net Realizable Cash Value of Accounts Accounts Payable Common Stock Retained Earnings Revenue Expenses Net Income Statement of Cash Flows Receivable 1 2 278,000 278,000 278,000 278,000 3 4 Total 278,000 278,000 278,000 278,000
Brief Exercise 7-1 (Algo) Analyzing financial statement effects of accounting for uncollectible accounts using the percent of revenue allowance method LO 7-1 CB Winter Sports specializes in providing ski lessons to beginners. The company uses the allowance method to account for uncollectible accounts expense. CB Sports experienced the following four accounting events in Year 1: 1. Recognized $278,000 of revenue on account. 2. Collected $138,000 cash from accounts receivable. 3. Wrote off uncollectible accounts of $2,900. 4. Recognized uncollectible accounts expense. CB estimated that uncollectible accounts expense will be 3 percent of sales on account Required: Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record the amounts of the events into the model. The first transaction is shown as an example Note: In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, and NC for net change in cash. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells require on input-leave cells blank if there is no corresponding input needed. Assets Balance Sheet Liabilities Income Statement Stockholders' Equity Event Number Net Realizable Cash Value of Accounts Accounts Payable Common Stock Retained Earnings Revenue Expenses Net Income Statement of Cash Flows Receivable 1 2 278,000 278,000 278,000 278,000 3 4 Total 278,000 278,000 278,000 278,000
Century 21 Accounting General Journal
11th Edition
ISBN:9781337680059
Author:Gilbertson
Publisher:Gilbertson
Chapter16: Financial Statements And Closing Entries For A Corporation
Section: Chapter Questions
Problem 5AP
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Transcribed Image Text:Brief Exercise 7-1 (Algo) Analyzing financial statement effects of accounting for uncollectible accounts
using the percent of revenue allowance method LO 7-1
CB Winter Sports specializes in providing ski lessons to beginners. The company uses the allowance method to account for
uncollectible accounts expense. CB Sports experienced the following four accounting events in Year 1:
1. Recognized $278,000 of revenue on account.
2. Collected $138,000 cash from accounts receivable.
3. Wrote off uncollectible accounts of $2,900.
4. Recognized uncollectible accounts expense. CB estimated that uncollectible accounts expense will be 3 percent of sales on
account.
Required:
Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of
cash flows. More specifically, record the amounts of the events into the model. The first transaction is shown as an example
Note: In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, and NC
for net change in cash. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells require an
input-leave cells blank if there is no corresponding input needed.
Assets
Balance Sheet
Liabilities
Income Statement
Stockholders' Equity
Event
Number
Net Realizable
Value of
Cash
Accounts
Accounts
Payable
Common
Stock
Retained Revenue Expenses
Earnings
Net
Income
Statement of Cash
Flows
1
Receivable
278,000
278,000
278,000
278.000
23
4
Total
278,000
0
+ + +
278,000 278,000
0
278,000
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