Apply GAAP for revenue, accounts receivable, and uncollectible receivables
Response to the following problem:
A fire during 2014 destroyed most of the accounting records of Clearview Cablevision, Inc. The only accounting data for 2014 that Clearview can come up with are the following balances at December 31, 2014. The general manager also knows that bad-debt expense should be 5% of service revenue on credit.
Accounts receivable, December 31, 2014 $ 180,000
Less: Allowance for bad debts (22,000)
Total expenses, excluding bad-debt expense ..... 670,000
Collections from customers 840,000
Write-offs of bad receivables 30,000
Accounts receivable, December 31, 2013 110,000
Prepare a summary income statement for Clearview Cablevision, Inc., for the year ended December 31, 2014. The stockholders want to know whether the company was profitable in 2014. Use a T-account for Accounts Receivable to compute service revenue. Assume that all revenues are on credit.