Brubacher Service Company sells for cash and on account. By selling on credit, Brubacher cannot expect to collect 100% of its accounts receivable. At December 31, 2014, and 2013, respectively, Brubacher reported the following on its balance sheet (in thousands of dollars):
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Dec-31
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2014
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2013
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Accounts receivable........................................................................
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$500
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$400
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Less: Allowance for uncollectibles............................................................
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-100
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-60
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Accounts receivable, net..............................................................................
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$400
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$340
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During the year ended December 31, 2014, Brubacher earned service revenue and collected cash from customers. Bad debt expense for the year was 5% of service revenue and Brubacher wrote off uncollectible accounts receivable.
Requirements
1.Prepare T-accounts for Accounts Receivable and Allowance for Uncollectibles, and insert the December 31, 2013, balances as given.
2.Journalize the following transactions of Brubacher for the ended December 31,2014. Explanations are not required.
a.Service revenue on account, $6,700 thousand
b.Collections from customers on account, $6,300 thousand
c.Bad debt expense, 5% of service revenue
d.Write-offs of uncollectible accounts receivable, $300 thousand
e.Recovered an account receivable, $5 thousand
3.Post to the Accounts Receivable and Allowance for Uncollectibles T-accounts.
4.Compute the ending balances for the two T-accounts, and compare to the Brubacher Service amounts at December 31, 2014. They should be the same.
5.Show what Brubacher should report on its income statement for the year ended December 31,2014.