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20 June, 20:58

Tyler Service Co. experienced the following transactions for 2014, its first year of operations: 1. Provided $86,000 of services on account. 2. Collected $72,000 cash from accounts receivable. 3. Paid $39,000 of salaries expense for the year. 4. Tyler adjusted the accounts using the following information from an accounts receivable aging schedule:

Number of Days Amount % to Be Uncollectible Allowance Balance

Current $7,500.01

0-30 2,000.05

31-60 1,500.10

61-90 1,000.30

Over 90 days 2,000.50

Organize the information in accounts under an accounting equation

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  1. 21 June, 00:41
    0
    Assets = Liaiblities + Equity

    Cash A/R Allowancwe = Revenues - Salaries - bad debt

    1 86000 86,000

    2 72,000 (72,000)

    3 (39,000) (39,000)

    4 (1,625) (1,625)

    Totals 33,000 + 14,000 - 1,625 = 86,000 - 39,000 - 1,625

    45,375.00 45,375.00

    Explanation:

    We multiply the outstanding account receivable by their probability accordign to the aging stimations.

    7,500 x 0.01 = 75

    2,000 x 0.05 = 100

    1,500 x 0.10 = 150

    1,000 x 0.30 = 300

    2,000 x 0.50 = 1,000

    Total 1,625

    This amount decreases the net amount of recievables and recognize a bad debt expense for that amount as well.

    Then, we add up the assets (cash and net receivables)

    and make sure it matches our equity accounts (revenues less expenses)
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