During the first year of operation, 2018, McGinnis Appliance recognized $316,000

Question

During the first year of operation, 2018, McGinnis Appliance recognized $316,000 of service revenue on account. At the end of 2018, the accounts receivable balance was $62.118. Even though this is his first year in business, the owner believes he will collect all but about 4 percent of the ending balance Required a. What amount of cash was collected by McGinnis during 2018? b. Assuming the use of an allowance system to account for uncollectible accounts, what amount should McGinnis record as uncollectible accounts expense in 2018? c. What is the net realizable value of receivables at the end of 2018? d. Show the effect of these transactions on the financial statements by recording the appropriate amounts in a horizontal statements model like the one shown here. When you record amounts in the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The letters NA indicate that an element is not affected by the event. Complete this question by entering your answers in the tabs below Req A to C Req D Show the effect of these transactions on the financial statements by recording the appropriate amounts in a horizontal statements model like the one shown here. When you record amounts in the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The letters NA indicate that an element is not affected by the event. (Enter any decreases to account balances and cash outflows with a minus sign.) show less MCGINNIS APPLIANCE Accounting Equation for the Year 2018 Assets Income Statement Event AccountsAllowance LiabiliiesEquity Statement of Cash Flow No. Cash RevenueExpense Net Income 2.

Explanation / Answer

ans a cash collected 253882 316000-62118 ans b Uncollectible account expense 2485 62118*4% ans c NRV Accounts Receivable 62118 Less: Allowance for Uncollectible Debts 2485 NRV -2485 ans d Event cash AR Allowance Liabilities Equity Revenue Expense Net income Cash flow 1 316000 316000 316000 316000 NA 2 253882 -253882 OA 3 2485 -2485 2485 -2485 NA

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