Chapter 5, Problem 5E

Analyzing financial statement effects of accounting for uncollectible accounts using the percent of revenue allowance method

Grover Inc. uses the allowance method to account for uncollectible accounts expense. Grover Inc. experienced the following four accounting events in 2018:

1. Recognized $92,000 of revenue on account.

2. Collected $78,000 cash from accounts receivable.

3. Wrote off uncollectible accounts of $720.

4. Recognized uncollectible accounts expense. Grover estimated that uncollectible accounts expense will be 1 percent of sales on account.

Required

Show the effect of each event on the elements of the financial statements, using a horizontal statements model like the one shown here. Use + for increase, − for decrease, and NA for not affected. In the cash flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The first transaction is entered as an example.