P & K Consultants has provided business consulting services for several years. The company uses the percentage of credit sales method to estimate bad debts for internal monthly reporting purposes. At the end of each quarter, the company adjusts its records using the aging of accounts receivable method. The company entered into the following selected transactions during the first quarter of 2017. 

a. During January, the company provided services for $200,000 on credit. 

b. On January 31, the company estimated bad debts using 1 percent of credit sales. 

c. On February 4, the company collected $100,000 of accounts receivable. 

d. On February 15, the company wrote off a $500 account receivable. 

e. During February, the company provided services for $150,000 on credit. 

f. On February 28, the company estimated bad debts using 1 percent of credit sales. 

g. On March 1, the company loaned $12,000 to an employee who signed a 10 percent note, due in three months. 

h. On March 15, the company collected $500 on the account written off one month earlier. 

i. On March 31, the company accrued interest earned on the note. 

j. On March 31, the company adjusted for uncollectable accounts, based on the following aging analysis, which includes the preceding transactions (as well as others not listed). Prior to the adjustment, Allowance for Doubtful Accounts has an unadjusted credit balance of $6,000. 

Required:

1. For items (a) through (j), analyze the amount and direction (+ or −) of effects on specific financial statement accounts and the overall accounting equation, and prepare journal entries. 

2. Show how the receivables related to these transactions would be reported in the current assets section of a classified balance sheet. 

3. Name the accounts related to Accounts Receivable and Note Receivable that would be reported on the income statement and indicate whether they would appear before, or after, Income from Operations.

Transcribed Image Text:

Number of Days Unpaid Customer Total 0-30 31-60 61-90 Over 90 $ 1,000 $ 500 $ 400 $ 100 Arrow Ergonomics Asymmetry Architecture Others (not shown to save space) Weight Whittlers 2,000 85,000 2,000 $2,000 4,000 34,000 42,000 5,000 2,000 Total Accounts Re celvable $90,000 $36,500 $ 42,400 $5,100 $6,000 Estimate d Uncollectable (%) 2% 10% 20% 40%