ACCT 505 Problem 5-25

Problem 5-25 Accounting for uncollectible accounts: Percent of receivables allowance method LO 5-3

  [The following information applies to the questions displayed below.]           Frankel Inc. experienced the following transactions for 2014, its first year of operations:          

 1.  Issued common stock for $110,000 cash.   

2.  Purchased $205,000 of merchandise on account.  

 3.  Sold merchandise that cost $156,000 for $310,000 on account.   

4.  Collected $274,000 cash from accounts receivable.   

5.  Paid $185,000 on accounts payable.   

6.  Paid $58,000 of salaries expense for the year.   

7.  Paid other operating expenses of $74,000.   

8.   Frankel adjusted the accounts using the following information from an accounts receivable aging schedule.

          Number of Days
Past Due Amount Percent Likely to
Be Uncollectible Allowance
Balance          Current $ 21,600   .01            0–30   9,000   .05            31–60   1,800   .10            61–90   1,800   .20            Over 90 days   1,800   .50  

Required       a.  

Organize the transaction data in accounts under an accounting equation. (Enter  any decreases to account balances with a minus sign. Select "NA" if  there is no effect on the "Accounts Titles for Retained Earnings".)

Problem 5-25 Part b

 b-1.  

Prepare the income statement for Frankel Inc. for 2014.

b-2

Prepare the statement of changes in stockholders’ equity for Frankel Inc. for 2014.

Prepare the balance sheet for Frankel Inc. for 2014. (Be sure to list the assets in the order of their liquidity.)

Prepare the statement of cash flows for Frankel Inc. for 2014. (Amounts to be deducted should be indicated 

with a minus sign.)

Problem 5-25 Part c

 c.  

What is the net realizable value of the accounts receivable at December 31, 2014?