
Concept explainers
1.
To record: The transactions for Adventure T occurring during the first six months of 2016.
1.

Explanation of Solution
Allowance method for uncollectible accounts:
It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method,
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
January 24,2016 | Equipment | 5,000 | ||
Cash | 5,000 | |||
(To record the equipment purchased for cash) | ||||
February 25, 2016 |
| 3,000 | ||
Service Revenue | 3,000 | |||
(To record providing services on account) | ||||
February 28, 2016 | Cash | 2,850 | ||
Sales discounts | 150 | |||
Accounts Receivable | 3,000 | |||
(To record receipt of cash with discount ) | ||||
March 19, 2016 | Accounts receivable | 4,000 | ||
Service Revenue | 4,000 | |||
(To record providing services on account) | ||||
March 27, 2016 | Cash | 3,800 | ||
Sales discounts | 200 | |||
Accounts Receivable | 4,000 | |||
(To record receipt of cash with discount ) | ||||
April 7, 2016 | Cash | 7,500 | ||
Deferred revenue | 7,500 | |||
(To record cash received in advance) | ||||
April 14, 2016 | Deferred revenue | 7,500 | ||
Service Revenue | 7,500 | |||
(To record providing services on account) | ||||
May 9, 2016 | Accounts Receivable | 6,000 | ||
Service Revenue | 6,000 | |||
(To record providing services on account) | ||||
June 1-30, 2016 | Accounts Receivable | 24,000 | ||
Service Revenue | 24,000 | |||
(To record providing services on account) | ||||
June 30, 2016 | Notes receivable | 6,000 | ||
Accounts Receivable | 6,000 | |||
(To record acceptance of note receivable) |
Table (1)
2 (a):
To record: The adjustment for uncollectible accounts.
2 (a):

Explanation of Solution
Bad debt expense:
Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. Estimated future uncollectible accounts receivable are known as bad debt expense.
Date | Account Title and Explanation | Debit($) | Credit($) | |
June 30, 2016 | Bad debts expenses (1) | 2,400 | ||
Allowance for uncollectible accounts | 2,400 | |||
(To record the estimation of future bad debts) |
Table (2)
Description:
- Bad debt expense is a component of
stockholders’ equity and decreased it. So, debit bad debt expense for $2,400, - Allowance for uncollectible accounts is a contra asset account and decreased it. So, credit allowance for uncollectible accounts for $2,400.
Working notes:
2 (b):
To Prepare: A partial
2 (b):

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 balance sheet.
Partial balance sheet of Incorporation GA:
Incorporation GA | ||
Partial Balance Sheet | ||
As at June 30, 2016 | ||
Assets | Amount ($) | Amount ($) |
Current assets: | ||
Accounts receivable | 24,000 | |
Less: Allowance for uncollectible accounts | (2,400) | |
Net accounts receivable | 21,600 |
Table (3)
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Chapter 5 Solutions
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