The Generation Employment Agency started business on January 1, 2020. The company pro- duced monthly financial...

  

 

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The Generation Employment Agency started business on January 1, 2020. The company pro- duced monthly financial statements and had total sales of $525,000 (of which $400,000 was on account) during the first four months. On April 30, Accounts Receivable had a balance of $236,400 (no accounts have been written off to date), which was made up of the following accounts aged according to the date of the sale: A C 1 Month of Sale 2 Customer January February March April 3 Golden Distributors 4 PG Courier 5 Personnel Solutions 6 Natures Design 7 Other Accounts Receivable $ 3,600 $ 1,000 $ 2,000 $ 1,800 1,000 1,200 3,400 2,400 5,000 14,000 8,000 4,000 2,000 7,400 8,120 28,400 23,760 16,360 53,480 49,480 8 $35,360 $39,960 $75,000 $86,080 The following accounts receivable transactions took place in May 2020: May 12 Decided the PG Courier account was uncollectible and wrote it off. 15 Collected $6,600 from Golden Distributors for sales made in the first three months. 21 Decided the Personnel Solutions account was uncollectible and wrote it off. 24 Collected $2,000 from Natures Design for sales made in the month of January. 26 Received a cheque from Personnel Solutions for $18,200 plus four cheques of $3,200 each, postdated to June 26, July 26, August 26, and September 26. 31 Total sales in the month were $380,000; 90 percent of these were on account, and 75 percent of the sales on account were collected in the month. 1. The Generation Employment Agency has heard that other companies in the industry use the allowance method of accounting for uncollectibles, with many of these estimat- ing the uncollectibles through an aging of accounts receivable. a. Journalize the adjustments that would have to be made on April 30 (for the months of January through April), assuming the following estimates of uncol- lectibles: Age of Accounts Receivable Percent Estimated Uncollectible From current month 3% From prior month 4 From two months prior 10 From three months prior 20 From four months prior 45 b. (Round your total estimate to the nearest whole dollar.) c. Journalize the transactions of May 2020. d. Journalize the month-end adjustment, using the information from the table that appears in Requirement la. 2. For the method of accounting for the uncollectibles used above, show: a. The balance sheet presentation of the accounts receivable. b. The overall effect of the uncollectibles on the income statement for the months of April and May 2020. The Generation Employment Agency started business on January 1, 2020. The company pro- duced monthly financial statements and had total sales of $525,000 (of which $400,000 was on account) during the first four months. On April 30, Accounts Receivable had a balance of $236,400 (no accounts have been written off to date), which was made up of the following accounts aged according to the date of the sale: A C 1 Month of Sale 2 Customer January February March April 3 Golden Distributors 4 PG Courier 5 Personnel Solutions 6 Natures Design 7 Other Accounts Receivable $ 3,600 $ 1,000 $ 2,000 $ 1,800 1,000 1,200 3,400 2,400 5,000 14,000 8,000 4,000 2,000 7,400 8,120 28,400 23,760 16,360 53,480 49,480 8 $35,360 $39,960 $75,000 $86,080 The following accounts receivable transactions took place in May 2020: May 12 Decided the PG Courier account was uncollectible and wrote it off. 15 Collected $6,600 from Golden Distributors for sales made in the first three months. 21 Decided the Personnel Solutions account was uncollectible and wrote it off. 24 Collected $2,000 from Natures Design for sales made in the month of January. 26 Received a cheque from Personnel Solutions for $18,200 plus four cheques of $3,200 each, postdated to June 26, July 26, August 26, and September 26. 31 Total sales in the month were $380,000; 90 percent of these were on account, and 75 percent of the sales on account were collected in the month. 1. The Generation Employment Agency has heard that other companies in the industry use the allowance method of accounting for uncollectibles, with many of these estimat- ing the uncollectibles through an aging of accounts receivable. a. Journalize the adjustments that would have to be made on April 30 (for the months of January through April), assuming the following estimates of uncol- lectibles: Age of Accounts Receivable Percent Estimated Uncollectible From current month 3% From prior month 4 From two months prior 10 From three months prior 20 From four months prior 45 b. (Round your total estimate to the nearest whole dollar.) c. Journalize the transactions of May 2020. d. Journalize the month-end adjustment, using the information from the table that appears in Requirement la. 2. For the method of accounting for the uncollectibles used above, show: a. The balance sheet presentation of the accounts receivable. b. The overall effect of the uncollectibles on the income statement for the months of April and May 2020.

Answer rating: 100% (QA)

SOLUTION A TABLE SHOWING AMOUNT CONSIDERED TO BE UNCOLLECTIBLE JAN FEB MARCH APRIL TOTAL ACCOUNTS RE... View the full answer