III. Morgan Enterprises fabricates hand built mouth pieces for brass band instru
ID: 2343125 • Letter: I
Question
III. Morgan Enterprises fabricates hand built mouth pieces for brass band instruments. Morgan reported gross accounts receivable of $19,433 at 12/31/17 and an allowance for doubtful accounts of $400. Following is the monthly activity for the first quarter of 2018: Credit Cash Sales Credit Sales Collections Write-Offs $ 5,665 $13,898 23,882 195 Month January February March Total 4,230 7,998 16,883 15,355 22,355 19,668 235 $ 17,893 $53,136 58,905 430 Morgan Enterprises records bad debt expense each month equal to 1.75% of credit sales. Show what would be reported on the March 31 balance sheet related to the above activity. Be sure to indicate the appropriate classification for each item. 1. 2. Show what would be reported on the March 31 income statement related to the above activity. Be sure to indicate the appropriate classification for each item. 3. Show what would be reported on the March 31 statement of cash flow related to the above activity. Operating activities should be shown under both the direct and indirect methods. Be sure to indicate the appropriate classification for each item.Explanation / Answer
Month Cash Sales Credit sales Credit Write offs Collections Jan 5665 13898 23882 195 Feb 4230 16883 15355 March 7998 22355 19668 235 TOTAL 17893 53136 58905 430 Bad debts expense (1.75% of credit sales) Total crdit sales 53136 Bad debts expense (53136*1.75%) 930 Accounts receivable (Gross) on Mar31 Beginning Balance 19433 Add: credit sales 53136 Less: Collections 58905 Less: Amount written off 430 Balance at the end 13,234 Allowance for doubtful Accounts on Mar31 Beginning balance 400 Add: Bad debts expenses 930 Less: Amount written off 430 Balance at the end 900 Balance Sheet (extract) Assets Current assets: Cash (17893+58905) 76798 Accounts receivable 13234 Less: Allowance 900 12334 Req 2. Income Statement: Bad debts expenses 930 Req 3. Statement of Cash flws (Direct method) Cashflows from Operating activities: Cash sales collected 17893 Collections from Accounts receivable 58905 Statement of cash flows (Indirect method) Cashflows from Operating activities Net income for the year XXX Adjustment required for reconciliation Bad debts expenses 930