Required: 1. For items (a) to ( analyze the transaction to determine effects on specific financial statement accounts and the overall accounting equation. (Enter any decreases to Assets, Liabilities, or Stockholders Equity with a minus sign. Do not round intermediate calculations.)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Web Wizard, Incorporated, 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.
a. During January, the company provided services for $45,000 on credit.
b. On January 31, the company estimated bad debts using 2 percent of credit sales.
c. On February 4, the company collected $22,500 of accounts receivable.
d. On February 15, the company wrote off $200 account receivable.
e. During February, the company provided services for $35,000 on credit.
On February 28, the company estimated bad debts using 2 percent of credit sales..
g. On March 1, the company loaned $2,000 to an employee, who signed a 6% note, due in 6 months.
h. 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 the following aging analysis, which includes
the preceding transactions (as well as others not listed). Prior to the adjustment, Allowance for Doubtful Accounts has
an unadjusted credit balance of $1,250.
Number of Days Unpaid
Customer
Alabama Tourism
Total
$ 200
to 30
$ 120
Bayside Bungalows
Others (not shown to save space)
Xciting Xcursions
450
18,100
380
Total Accounts Receivable
$19,130
7,300
388
$ 7,800
31 to 60
$ 70
8,900
61 to 90
Over 90
$ 10
1,200
$ 450
780
$ 8,970
Estimated Uncollectible (%)
3%
10%
$1,210
20%
$1,150
40%
Required:
1. For items (a) to (), analyze the transaction to determine effects on specific financial statement accounts and the overall accounting
equation. (Enter any decreases to Assets, Liabilities, or Stockholders Equity with a minus sign. Do not round intermediate
calculations.)
Transcribed Image Text:Web Wizard, Incorporated, 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. a. During January, the company provided services for $45,000 on credit. b. On January 31, the company estimated bad debts using 2 percent of credit sales. c. On February 4, the company collected $22,500 of accounts receivable. d. On February 15, the company wrote off $200 account receivable. e. During February, the company provided services for $35,000 on credit. On February 28, the company estimated bad debts using 2 percent of credit sales.. g. On March 1, the company loaned $2,000 to an employee, who signed a 6% note, due in 6 months. h. 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 the following aging analysis, which includes the preceding transactions (as well as others not listed). Prior to the adjustment, Allowance for Doubtful Accounts has an unadjusted credit balance of $1,250. Number of Days Unpaid Customer Alabama Tourism Total $ 200 to 30 $ 120 Bayside Bungalows Others (not shown to save space) Xciting Xcursions 450 18,100 380 Total Accounts Receivable $19,130 7,300 388 $ 7,800 31 to 60 $ 70 8,900 61 to 90 Over 90 $ 10 1,200 $ 450 780 $ 8,970 Estimated Uncollectible (%) 3% 10% $1,210 20% $1,150 40% Required: 1. For items (a) to (), analyze the transaction to determine effects on specific financial statement accounts and the overall accounting equation. (Enter any decreases to Assets, Liabilities, or Stockholders Equity with a minus sign. Do not round intermediate calculations.)
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