Question

The following events occur for The Underwood Corporation during 2021 and 2022, its first two years of operations.
June 12, 2021, Provide services to customers on account for $33,800
September 17, 2021, Receive $19,000 from customers on account
December 31, 2021, Estimate that 40% of accounts receivable at the end of the year will not be received.
March 4, 2022, Provide services to customers on account for $48,800
May 20, 2022, Receive $10,000 from customers for services provided in 2021.
July 2, 2022, Write off the remaining amounts owed from services provided in 2021
October 19, 2022, Receive $39,000 from customers for services provided in 2022.
December 31, 2022, Estimate that 40% of accounts receivable at the end of the year will not be received.
Calculate net accounts receivable at the end of 2021 and 2022.
2021 2021
Total accounts receivable
Less: Allowance for uncollectible acounts
Net accounts receivable

Answer 1

Answer:

The Underwood Corporation

Calculation of the net accounts receivable at the end of 2021 and 2022:

                                                                          2021                 2021

Total accounts receivable                                $14,800           $9,800

Less: Allowance for uncollectible accounts       5,920             3,920

Net accounts receivable                                  $8,880           $5,880

Explanation:

a) Accounts Receivable:

June 12, 2021: Service Revenue  $33,800

Sept. 17, 2021: Cash receipts         (19,000)

Dec. 31, 2021: Balance                  $14,800

March 4, 2022: Service revenue   48,800

May 20, 2022: Cash receipts       (10,000)

July 2, 2022: Allowance for           (4,800)

Oct. 19, 2022: Cash receipts       (39,000)

Dec. 31, 2022: Balance                 $9,800

b) Allowance for uncollectible accounts:

Dec. 31, 2021: Bad Debts Expense $5,920

July 2, 2022: Accounts Receivable (4,800)

Dec. 31, 2022: Bad Debts Expense  2,800

Dec. 31, 2022: Balance                   $3,920

c) The allowance for doubtful accounts for The Underworld Corporation for 2022 will record a bad debts expense of $2,800, which represents the adjusting difference between the beginning balance of $5,920, the accounts receivable written off, and the ending balance of $3,920.