1. Percent Likely to Be Uncollectible
Friedo Service Co. experienced the following transactions for Year 1, its first year of operations:
1. Provided $90,000 of services on account.
2. Collected $75,000 cash from accounts receivable.
3. Paid $30,000 of salaries expense for the year.
4. Friedo adjusted the accounts using the following information from an accounts receivable aging schedule:
Required
a. Record the above transactions in general journal form and post them to T-accounts.
b. Prepare the income statement for Friedo Service Co. for Year 1.
c. What is the net realizable value of the accounts receivable at December 31, Year 1?
Number of Days Past Due
Amount
Percent Likely to Be Uncollectible
Allowance
Balance
Current
$6,000
0.01
0–30
3,500
0.05
31–60
2,000
0.10
61–90
1,500
0.40
Over 90 days
0.50
In this exercise we will prepare the journal entries and post them into T-accounts. We will also compute the uncollectible accounts expense using aging schedule. At the end we will prepare the income statement and determine the net realizable value of accounts receivables on December 31, Year 1.