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Concept explainers
1.
Prepare the transactions of engineering M for each date.
1.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
February 2,2021 | 38,000 | |||
Service revenue | 38,000 | |||
( To record the service provided on account) | ||||
July 23,2021 | Cash | 27,000 | ||
Accounts receivable | 27,000 | |||
( To record the receipt of cash on account) | ||||
December 31, 2021 | Bad debt expense (1) | 2,750 | ||
Allowance for uncollectible accounts | 2,750 | |||
( To record the estimation of future | ||||
April 12, 2022 | Accounts receivable | 51,000 | ||
Service Revenue | 51,000 | |||
( To record the services provided on account) | ||||
June 28, 2022 | Cash | 6,000 | ||
Accounts receivable | 6,000 | |||
( To record receipt of cash on account) | ||||
September 13, 2022 | Allowance for uncollectible accounts | 5,000 | ||
Accounts receivable | 5,000 | |||
( To record the writing-off of actual bad debts) | ||||
October 5, 2022 | Cash (4) | 45,000 | ||
Accounts receivable | 45,000 | |||
( To record the receipt of cash from customer on account) | ||||
December 31, 2022 | Bad debt expense (3) | 3,750 | ||
Allowance for uncollectible accounts | 3,750 | |||
( To record the estimation of future bad debts) |
Table (1)
Working notes:
Calculate Estimate future bad debts On December 31, 2021:
(1)
(2)
Calculate Estimate future bad debts On December 31, 2022:
(3)
Calculate the value of accounts receivable:
(4)
Calculate the balance in allowance for uncollectible accounts after written off:
(5)
2.
2.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Accounts receivable:
Accounts receivable is an asset of the firm, which refers to the amount which the company would receive in near future for the goods or services provided; hence it is shown in the
For 2021:
Cash account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
July 23,2021 | Accounts receivable | $27,000 | |||
December 31, 2021 | Balance (Balancing figure) | $27000 |
Table (2)
For 2022:
Cash account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
January 1, 2022 | Beginning balance | $27,000 | |||
June 28, 2022 | Accounts receivable | $6,000 | |||
October 5, 2022 | Accounts receivable | $45,000 | |||
December 31, 2022 | Balance (balancing figure) | $78,000 |
Table (3)
For 2021:
Accounts receivable account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
February 2, 2021 | Service revenue | $38,000 | July 23,2021 | Cash | $27000 |
December 31, 2021 | Balance (Balancing figure) | $11,000 |
Table (4)
For 2022:
Accounts receivable account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
April 12, 2022 | Service revenue | $51,000 | June 28, 2022 | Cash | $6,000 |
September 13, 2022 | Allowance for uncollectible accounts | $5,000 | |||
October 5, 2022 | Cash | 45,000 | |||
December 31, 2022 | Balance (balancing figure) | $6,000 |
Table (5)
For 2021:
Allowance for uncollectible account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
December 31, 2021 | Bad debt expense | $2,750 |
Table (6)
For 2022:
Allowance for uncollectible account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
September 13, 2022 | Accounts receivable | $5,000 | December 31, 2022 | Bad debt expense | $3,750 |
December 31, 2022 | Balance (balancing figure) | $1,500 |
Table (7)
3.
Calculate the net realizable value of accounts receivable at the end of 2021 and 2022.
3.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Calculate the net realizable value of accounts receivable at the end of 2021 and 2022:
Years | 2021 | 2022 |
Total accounts receivable | $11,000 | $6,000 |
Less: Allowance for uncollectible accounts | ($2,750) | ($1,500) |
Net realizable value | $8,250 | $4,500 |
Table (8)
Hence, the net realizable value of Engineering M for the year 2021 is $ 8,250 and for the year 2022 is $ 4,500.
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