Sage Inc. experienced the following transactions for 2018, its first year of ope

Question

Sage Inc. experienced the following transactions for 2018, its first year of operations 1. Issued common stock for $120,000 cash. 2. Purchased $190,000 of merchandise on account. 3. Sold merchandise that cost $160,000 for $318,000 on account. 4. Collected $284,000 cash from accounts receivable 5. Paid $170,000 on accounts payable 6. Paid $54,000 of salaries expense for the year 7. Paid other operating expenses of $70,000 8. Sage adjusted the accounts using the following information from an accounts receivable aging schedule Number of Days Percent Likely to Be Allowance Uncollectible 0.01 0.05 0.10 0.20 0.50 Balance Amount $20,400 8,500 1,700 1,700 1,700 Past Due Current 0-30 31-60 61-90 Over 90 days

Explanation / Answer

bad debt expense :[20400*.01]+[8500*.05]+[1700*.1]+[1700*.2]+[1700*.5]=1139

SAGE INC Accounting Equation Event Asset Liabilities Equity cash Accounts receivable Allowance merchandise inventory Accounts payable common stock Retained earnings Account title for Retained earning 1 120000 120000 2 190000 190000 3a 318000 318000 revenue 3b -160000 -160000 expense 4 284000 -284000 5 -170000 -170000 6 -54000 -54000 expense 7 -70000 -70000 expense 8 1139 -1139 expense Balance 110000 34000 1139 30000 20000 120000 32861

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