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Oakley Service Company sells for cash and on account. By selling on credit, Oakley cannot expect to collect 100% of its accounts receivable. At December 31, 20X6, and 20X5, respectively, Oakley reported the following on its balance sheet (in thousands of dollars):
|
December 31, |
||
|
20X6 |
20X5 |
|
|
Accounts receivable |
$500 |
$400 |
|
Less: Allowance for un collectibles |
(95) |
(60) |
|
Accounts receivable, net |
$405 |
$340 |
During the year ended December 31, 20X6, Oakley earned service revenue and collected cash from customers. Uncollectible-account expense for the year was 5% of service revenue and Oakley wrote off uncollectible accounts receivable. At year end, Oakley ended with the foregoing December 31, 20X6, balances.
Required
1. Prepare T-accounts for Accounts Receivable and Allowance for Uncollectibles, and insert the December 31, 20X5, balances as given.
2. Journalize the following transactions of Oakley for the year ended December 31, 20X6 (explanations are not required):
a. Service revenue on account, $6,700 thousand.
b. Collections from customers on account, $6,300 thousand.
c. Uncollectible-account expense, 5% of service revenue.
d. Write-offs of uncollectible accounts receivable, $300 thousand.
3. Post to the Accounts Receivable and Allowance for Uncollectibles T-accounts.
4. Compute the ending balances for the 2 T-accounts and compare to the Oakley Tire amounts at December 31, 20X6. They should be the same.
5. Show what Oakley should report on its income statement for the year ended
December 31, 20X6.
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