Operating activities: Operating activities refer to the normal activities of a company to carry out the business. The examples for operating activities are purchase of inventory, payment of salary, sales, and others. To Explain: The method of reporting warranty expense in the statement of cash flows in indirect method, and the similar accounts.

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Chapter 21, Problem 21.16Q

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Operating activities: Operating activities refer to the normal activities of a company to carry out the business. The examples for operating activities are purchase of inventory, payment of salary, sales, and others.

To Explain: The method of reporting warranty expense in the statement of cash flows in indirect method, and the similar accounts.

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ayco Inc. started its operations in 2022. Its sales during 2022, all on account, totalled $700,000. The company collected $500,000 in cash from customers during the year and wrote off $8,000 in uncollectible accounts. The company set up an allowance for doubtful accounts at December 31, 2022, its fiscal year-end, and determined the account balance to be $14,000. The unadjusted balances of selected accounts at December 31, 2023 are as follows: Accounts receivable $ 300,000 Allowance for doubtful accounts (debit) 10,000 Sales revenue (including 80 percent in sales on account) 800,000 Aging of the accounts receivable on December 31, 2023, resulted in an estimate of $11,000 in potentially uncollectible accounts. Required: 1. Prepare the journal entries to record all the transactions during 2022 and post them to appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)…

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