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

Calculate Net realizable value :

Calculation of Allowance of doubtful account :

Account receivable = 318000-284000 = 34000

Net realizable value = 34000-1989 = 32011

No of days past dues amount percent likely to be uncollectible Allowance for doubtful current 20400 0.01 204 0-30 days 8500 0.05 425 31-60 days 1700 0.10 170 61-90 days 1700 0.20 340 Over 90 days 1700 0.50 850 Total 1989

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