Transactions Related to Accounts Receivable: Effects on Selected Financial Statement Items
Spit Spot Cleaners, Inc., recognized the following events related to customer accounts receivable during the firm’s first year of operation:
1. Sales on credit totaled $4,000,000 for the year.
2. The firm estimated that 2% of its credit sales would ultimately prove to be uncollectible.
3. Cash collections of accounts receivable totaled $3,480,000 during the year.
4. The firm wrote off uncollectible accounts of $75,000.
Required
a. Determine the effects of each of these events on the following financial statement items:
• Accounts receivable (net of allowance)
• Total assets
• Revenues
• Expenses
b.Determine the firm’s balance of accounts receivable (net) at December 31 (year end).