
Concept explainers
(Supplement 8A) Recording Write-Offs and Reporting
Trevorson Electronics is a small company privately owned by Jon Trevorson, an electrician who installs wiring in new homes. Because the company’s financial statements are prepared only for tax purposes, Jon uses the direct write-off method. During 2015, its first year of operations, Trevorson Electronics sold $30,000 of services on account. The company collected $26,000 of these receivables during the year, and Jon believed that the remaining $4,000 was fully collectible. In 2016, Jon discovered that none of the $4,000 would be collected, so he wrote off the entire amount. To make matters worse, Jon sold only $5,000 of services during the year.
Required:
- 1. Prepare
journal entries to record the transactions in 2015 and 2016. - 2. Using only the information provided (ignore other operating expenses), prepare comparative income statements for 2015 and 2016. Was 2015 really as profitable as indicated by its income statement? Was 2016 quite as bad as indicated by its income statement? What should Jon do if he wants better information for assessing his company’s ability to generate profit?

Want to see the full answer?
Check out a sample textbook solution
Chapter 8 Solutions
Loose-leaf for Fundamentals of Financial Accounting with Connect
- What is the sales margin ??arrow_forwardHi expert please help me this question general accountingarrow_forwardBix Corp. has a contribution margin ratio of 50%. This month, sales revenue was $250,000, and profit was $60,000. If sales revenue increases by $30,000, by how much will profit increase? A) $12,000 B) $5,500 C) $7,500 D) $15,000arrow_forward
- Majestic Collectibles can produce keepsakes that will be sold for $75 each. Non-depreciation fixed costs are $1,200 per year, and variable costs are $55 per unit. What is the degree of operating leverage of Majestic Collectibles when sales are $8,250?arrow_forwardWhat is the amount of gross profit earned......?arrow_forwardhello teacher please solve questions general accountingarrow_forward
- College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT

