Accounting for uncollectible accounts: percent of receivables allowance method
Huggins Inc. experienced the following transactions for 2010, its first year of operations.
1. Issued common stock for $60,000 cash.
2. Purchased $210,000 of merchandise on account.
3. Sold merchandise that cost $130,000 for $245,000 on account.
4. Collected $215,000 cash from accounts receivable.
5. Paid $196,000 on accounts payable.
6. Paid $38,000 of salaries expense for the year.
7. Paid other operating expenses of $28,000.
8. Huggins adjusted the accounts using the following information from an accounts receivable aging schedule.
|
Number of Days |
Percent Likely to |
Allowance |
|
|
Past Due |
Amount |
Be Uncollectible |
Balance |
|
Current |
$19,000 |
.01 |
|
|
0–30 |
3,000 |
.05 |
|
|
31–60 |
4,500 |
.10 |
|
|
61–90 |
1,500 |
.20 |
|
|
Over 90 days |
2,000 |
.50 |
Required
a. Organize the transaction data in accounts under an accounting equation.
b. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Huggins Inc. for 2010.
c. What is the net realizable value of the accounts receivable at December 31, 2010?