During the first year of operation, Year 1, Direct Service Company recognized $304,000 of service revenue on account. At the end of Year 1, the accounts receivable balance was $59,759. For this first year in business, the owner believes uncollectible accounts expense will be about 7 percent of sales on account. Required a. What amount of cash did Direct Service collect from accounts receivable during Year 1? b. Assuming Direct Service uses the allowance method to account for uncollectible accounts, what amount should Direct Service record as uncollectible accounts expense for Year 1? c. Prepare the general journal entries to: (1) Record service revenue on account. (2) Record collections from accounts receivable. (3) Record the entry to recognize uncollectible accounts expense. d. What is the net realizable value of receivables at the end of Year 1? e. Show the effects of the transactions in Requirement c on the financial statements by recording the appropriate amounts in a horizontal statements model. When you record amounts in the Statement of Cash Flows column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Leave the cell blank to indicate that an element is not affected
During the first year of operation, Year 1, Direct Service Company recognized $304,000 of service revenue on account. At the end of Year 1, the accounts receivable balance was $59,759. For this first year in business, the owner believes uncollectible accounts expense will be about 7 percent of sales on account. Required a. What amount of cash did Direct Service collect from accounts receivable during Year 1? b. Assuming Direct Service uses the allowance method to account for uncollectible accounts, what amount should Direct Service record as uncollectible accounts expense for Year 1? c. Prepare the general journal entries to: (1) Record service revenue on account. (2) Record collections from accounts receivable. (3) Record the entry to recognize uncollectible accounts expense. d. What is the net realizable value of receivables at the end of Year 1? e. Show the effects of the transactions in Requirement c on the financial statements by recording the appropriate amounts in a horizontal statements model. When you record amounts in the Statement of Cash Flows column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Leave the cell blank to indicate that an element is not affected
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter15: Financial Statement Analysis
Section: Chapter Questions
Problem 14BEA: Last year, Nikkola Company had net sales of 2.299.500,000 and cost of goods sold of 1,755,000,000....
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Transcribed Image Text:During the first year of operation, Year 1, Direct Service Company recognized $304,000 of service revenue on account. At the end of
Year 1, the accounts receivable balance was $59,759. For this first year in business, the owner believes uncollectible accounts expense
will be about 7 percent of sales on account.
Required
a. What amount of cash did Direct Service collect from accounts receivable during Year 1?
b. Assuming Direct Service uses the allowance method to account for uncollectible accounts, what amount should Direct Service
record as uncollectible accounts expense for Year 1?
c. Prepare the general journal entries to:
(1) Record service revenue on account.
(2) Record collections from accounts receivable.
(3) Record the entry to recognize uncollectible accounts expense.
d. What is the net realizable value of receivables at the end of Year 1?
e. Show the effects of the transactions in Requirement c on the financial statements by recording the appropriate amounts in a
horizontal statements model. When you record amounts in the Statement of Cash Flows column, indicate whether the item is an
operating activity (OA), investing activity (IA), or financing activity (FA). Leave the cell blank to indicate that an element is not affected
by the event.
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