Question: During the first year of operation 2014 Clayton Repair Co

During the first year of operation, 2014, Clayton Repair Co. recognized $500,000 of service revenue on account. At the end of 2014, the accounts receivable balance was $72,000. For this first year in business, the owner believes uncollectible accounts expense will be about 1 percent of sales on account.

a. What amount of cash did Clayton collect from accounts receivable during 2014?
b. Assuming Clayton uses the allowance method to account for uncollectible accounts, what amount should Clayton record as uncollectible accounts expense for 2014?
c. What is the net realizable value of receivables at the end of 2014?
d. Show the effects of the above transactions on the financial statements by recording the appropriate amounts in a horizontal statements model like the one shown here. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA for notaffected.

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  • CreatedMay 22, 2014
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