Vulcan Service Co. experienced the following transactions for Year 1, its first year of operations: Provided $91,000 of services on account. Collected $72,000 cash from accounts receivable. Paid $36,000 of salary expense for the year. Adjusted the accounts using the following information from accounts receivable aging schedule:
Number of Days Past Due Amount Percent Likely to Be Uncollectible Allowance Balance
Current $24,864 0.01
0-30 1,680 0.05
31-60 2,352 0.10
61-90 2,016 0.30
Over 90 days 2,688 0.50
Required:
a. Record the above transactions in general journal form and post to T-accounts.
b. Prepare the income statement for Vulcan Service Co. for Year 1.
c. What is the net realizable value of the accounts receivable at December 31, Year 1?

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khurramilyas95 khurramilyas95 · Answer 1 · 2020-02-15T13:13:08+01:00

Answer:

Explanation:

Uncollectible Accounts Expense was calculated as follows;

Uncollectible Accounts Expense =

(24,864 * 0.01) + (1,680 * 0.05) + (2,352 * 0.10) + (2,016 * 0.30) + (2,688 * 0.50)

Uncollectible Accounts Expense = 2516.64 [tex]\cong[/tex] $2517

From part (a), we know that:

Accounts Receivable (End-Year) = $19000

Allowance for Doubtful Accounts = $2517

Net Realizable Value =

Accounts Receivable (End-Year) - Allowance for Doubtful Accounts

Net Realizable Value = 19000 - 2517

Net Realizable Value = $16483.