Web Wizard, Inc. has provided information technology services for several years.

Question

Web Wizard, Inc. has provided information technology services for several years. The company uses the percentage of credit sales method to estimate bad debts for internal monthly reporting purposes. At the end of each quarter, the company adjusts its records using the aging of accounts receivable method. The company entered into the following partial list of transactions during the first quarter. a. During January, the company provided services for $44,000 on credit. b. On January 31, the company estimated bad debts using 1 percent of credit sales c. On February 4, the company collected $22,000 of accounts receivable d. On February 15, the company wrote off a $150 account receivable e. During February, the company provided services for $34,000 on credit. f On February 28, the company estimated bad debts using 1 percent of credit sales g. On March 1, the company loaned $2,200 to an employee who signed a 6% note, due in 6 months. h. On March 15, the company collected $150 on the account written off one month earlier. i. On March 31, the company accrued interest earned on the note j. On March 31, the company adjusted for uncollectible accounts, based on an aging analysis (below) Allowance for Doubtful Accounts has an unadjusted credit balance of $1,240 Number of Days Unpaid Customer Total $ 230 $ 110 $ 90 $ 30 0-30 31-60 61-90 Over 90 Alabama Tourism Bayside Bungalows Others (not shown to save space) 18,000 7,200 8,800 1,100 900 Xciting Xcursions 440 $ 440 390 390 $19,060 $7,700 $8,890 $1,130 $1,340 Total Accounts Receivable Estimated uncollectible (%) 2% 10% 20% 30%

Explanation / Answer

ournal Entries S. No. Particulars Dr. Amt. Cr. Amt. a. Accounts Receivable                                     $44,000 Service Revenue $44,000 To Record Service Performed b. Bad Debts   ( $44000X1%)                                             $440 allowance for Uncollectible Debt $440 To Record Bad Debt Provision c. Cash                                                                     . $22,000 Accounts Receivable $22,000 To Recored Receivable received d. Allowance for Uncollectible Debt            $150 Accounts Receivable $150 To Record Wrote off AR e. Accounts Receivable                                      $34,000 Service Revenue $34,000 To Record Service Performed f. Bad Debts  ($34000*1%) $340 Allowance for Uncollectible Debt $340 To Record Bad Debt Provision g. Note Receivable                                            $2,200 Cash $2,200 TO Record Money loaned h. Accounts Receivable                                     $150 Allowance for Uncollectible Debt $150 To Record the reversal of Bad debt Cash                                                                       $150 Accounts Receivable $150 To Record received of Bad debdt Amount i. Interest Receivable ($2200X6%X1/12) $11 Interest Revenue $11 To Record Interest Revenue j. Bad Debts                                                        $431 Allowance for Uncollectible Debt $431 ($7700*2%+$8890*10%+$1130*20%+$1340*30%)-$1240 WEB WIZARD INC., Partial Balance Sheet at March 31 Assets Current Assets: Accounts Receviable $55,850 Less: Allownace for Doubtful Debts (431+$1240) ($1,671) Accounts Receivable, Net of Allowance $54,179 Note Receivable $2,200 Interest Receivable $11 Web Wizard would repot Bad Debt Expense Before Income From Operations Interest Revenue After Income From Operations

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