Trevorson Electronics is a small company privately owned by Jon Trevorson, an electrician who installs wiring in new homes. Because the company’s financial statements are prepared for internal purposes only, Jon uses the direct write-off method. During 2016, its first year of operations, Trevorson Electronics sold $30,000 of services on account. The company collected $26,000 of these receivables during the year, and Jon believed that the remaining $4,000 was fully collectable. In 2017, Jon discovered that none of the $4,000 would be collected, so he wrote off the entire amount. To make matters worse, Jon sold only $5,000 of services during the year. 

Required: 

1. Prepare journal entries to record the transactions in 2016 and 2017. 

2. Using only the information provided (ignore other operating expenses), prepare comparative income statements for 2016 and 2017. Was 2016 really as profitable as indicated by its income statement? Was 2017 quite as bad as indicated by its income statement? What should Jon do if he wants better information for assessing his company’s ability to generate profit?