LO 5-2, 5-3
Problem 5-25A Accounting for uncollectible accounts: Percent of receivables allowance
method
Sage Inc. experienced the following transactions for Year 1, its first year of operations:
CHECK FIGURE
b. Net income: $61,430
Total assets: $133,430
1. Issued common stock for $50,000 cash.
2. Purchased $140,000 of merchandise on account.
3. Sold merchandise that cost $110,000 for $250,000 on account.
4. Collected $236,000 cash from accounts receivable.
5. Paid $118,000 on accounts payable.
6. Paid $50,000 of salaries expense for the year.
7. Paid other operating expenses of $28,000.
8. Sage adjusted the accounts using the following information from an accounts
receivable aging schedule:
Number of Days
Past Due
Percent Likely to Allowance
Amount Be Uncollectible
Balance
Current
$10,000
0.01
0-30
2,000
0.05
31-60
1,200
0.10
61-90
500
0.20
Over 90 days
300
0.50
Required
a. Organize the transaction data in accounts under an accounting equation.
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b. Prepare the income statement, statement of changes in stockholders' equity, balance
sheet, and statement of cash flows for Sage Inc. for Year 1.
