This problem takes you through the accounting for sales, receivables, and uncollectibles for Dependable Delivery Corp, the overnight shipper. By selling on credit, the company cannot expect to collect 100% of its accounts receivable. At May 31, 2010, and 2011, respectively, Dependable Delivery Corp. reported the following on its balance sheet (in millions of dollars):

During the year ended May 31, 2011, Dependable Delivery Corp. earned sales revenue and collected cash from customers. Assume uncollectible-account expense for the year was 1% of service revenue and Dependable Delivery wrote off uncollectible receivables. At year end, Dependable Delivery ended with the foregoing May 31, 2011 balances.

Requirements
1. Prepare T-accounts for Accounts Receivable and Allowance for Uncollectibles, and insert the May 31, 2010, balances as given.
2. Journalize the following transactions of Dependable Delivery for the year ended May 31, 2011. (Explanations are not required.)
a. Service revenue on account, $32,487 million.
b. Collections from customers on account, $31,877 million.
c. Uncollectible-account expense, 1% of service revenue.
d. Write-offs of uncollectible accounts receivable, $352 million.
3. Post to the Accounts Receivable and Allowance for Uncollectibles T-accounts.
4. Compute the ending balances for the two T-accounts and compare your balances to the actual May 31, 2011, amounts. They should be the same.
5. Show what Dependable Delivery should report on its income statement for the year ended May 31,2011.

Transcribed Image Text:

May 31, 2011 2010 S3,693 $3,435 (129) (156) .$3,564 $3,279 Accounts receivable. Accounts receivable, net.