During the first year of operation, Year 1, McGinnis Appliance recognized $275,000 of service revenue on account. At the end of Year 1, the accounts receivable balance was $55,300. Even though this is his first year in business, the owner believes he will collect all but about 3 percent of the ending balance. 

Required

a. What amount of cash was collected by McGinnis during Year 1?

b. Assuming the use of an allowance system to account for uncollectible accounts, what amount should McGinnis record as uncollectible accounts expense in Year 1?

c. What is the net realizable value of receivables at the end of Year 1?

d. Show the effect of these transactions on the financial statements by recording the appropriate amounts in a horizontal statements model like the one shown here. When you record amounts in the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The letters NA indicate that an element is not affected by the event.

Transcribed Image Text:

Balance Sheet Income Statement Statement of Assets Llab. + Stk. Equity Cash Flows Cash NRV Accts. Rec. Rev. Еxp. Net Inc.