(Learning Objectives 1, 4, 5, 6: Apply GAAP for revenue, receivables, collections,and uncollectibles using the percent-of-sales method; account for notes receivable) LincolnDelivery Corporation is an overnight shipper. Since it sells on credit, the company cannotexpect to collect 100% of its accounts receivable. At December 31, 2018, and 2019,respectively, Lincoln reported the following on its balance sheet (in millions of dollars):December 31,2019 2018Accounts receivable.................................................. $4,300 $3,900Less: Allowance for uncollectible accounts...............Accounts receivable, net........................................... $4,110 $3,690(190) (210)During the year ended December 31, 2019, Lincoln earned service revenue and collected cashfrom customers. Assume uncollectible-account expense for the year was 3% of service revenueon account and that Lincoln wrote off uncollectible receivables and made other adjustmentsas necessary (see below). At year-end, Lincoln ended with the foregoing December 31, 2019,balances.Requirements1. Prepare T-accounts for Accounts Receivable and Allowance for Uncollectible Accounts,and insert the December 31, 2018, balances as given.2. Journalize the following transactions of Lincoln for the year ended December 31, 2019(explanations are not required):a. Service revenue was $32,600 million, of which 15% is cash and the remainder is onaccount.b. Collections from customers on account were $26,364 million.c. Uncollectible-account expense was 3% of service revenue on account.d. Write-offs of uncollectible accounts receivable were $851 million.e. On December 1, Lincoln received a 2-month, 9%, $135 million note receivable from alarge corporate customer in exchange for the customer’s past due account; Lincoln madethe proper year-end adjusting entry for the interest on this note.f. Lincoln’s December 31, 2019, year-end bank statement reported $40 million ofnon-sufficient funds (NSF) checks from customers.3. Post your entries to the Accounts Receivable and the Allowance for Uncollectible AccountsT-accounts.4. Compute the ending balances for Accounts Receivable and the Allowance for Uncollectible Accounts and compare your balances to the actual December 31, 2019, amounts. Theyshould be the same. How much does Lincoln expect to collect from its customers afterDecember 31, 2019?5. Show the net effect of these transactions on Lincoln Delivery’s net income for the yearended December 31, 2019.
(Learning Objectives 1, 4, 5, 6: Apply GAAP for revenue, receivables, collections,
and uncollectibles using the percent-of-sales method; account for notes receivable) Lincoln
Delivery Corporation is an overnight shipper. Since it sells on credit, the company cannot
expect to collect 100% of its
respectively, Lincoln reported the following on its
December 31,
2019 2018
Accounts receivable.................................................. $4,300 $3,900
Less: Allowance for uncollectible accounts...............
Accounts receivable, net........................................... $4,110 $3,690
(190) (210)
During the year ended December 31, 2019, Lincoln earned service revenue and collected cash
from customers. Assume uncollectible-account expense for the year was 3% of service revenue
on account and that Lincoln wrote off uncollectible receivables and made other adjustments
as necessary (see below). At year-end, Lincoln ended with the foregoing December 31, 2019,
balances.
Requirements
1. Prepare T-accounts for Accounts Receivable and Allowance for Uncollectible Accounts,
and insert the December 31, 2018, balances as given.
2. Journalize the following transactions of Lincoln for the year ended December 31, 2019
(explanations are not required):
a. Service revenue was $32,600 million, of which 15% is cash and the remainder is on
account.
b. Collections from customers on account were $26,364 million.
c. Uncollectible-account expense was 3% of service revenue on account.
d. Write-offs of uncollectible accounts receivable were $851 million.
e. On December 1, Lincoln received a 2-month, 9%, $135 million note receivable from a
large corporate customer in exchange for the customer’s past due account; Lincoln made
the proper year-end
f. Lincoln’s December 31, 2019, year-end bank statement reported $40 million of
non-sufficient funds (NSF) checks from customers.
3.
T-accounts.
4. Compute the ending balances for Accounts Receivable and the Allowance for Uncollectible Accounts and compare your balances to the actual December 31, 2019, amounts. They
should be the same. How much does Lincoln expect to collect from its customers after
December 31, 2019?
5. Show the net effect of these transactions on Lincoln Delivery’s net income for the year
ended December 31, 2019.
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