The Sales, All on Account, of Marla Company in Year

question 51

Essay

The sales, all on account, of Marla Company in Year 6, its first year of operations, were $700,000.Collections totaled $500,000.On December 31, Year 6, Marla Company estimated that 2 percent of all sales would probably be uncollectible.On that date, Marla Company wrote off specific accounts in the amount of $8,000.
Marla Company's unadjusted trial balance (after all nonadjusting entries were made and after all write-offs of specific accounts receivable identified during Year 7 as being uncollectible) on December 31, Year 7, includes the following accounts and balances:
$\begin{array}{lc}\text { Accounts Receivable (Dr.) } & \$ 300,000 \\\text { Allowance for Uncollectible Accounts (Dr.) } & 10,000 \\\text { Sales (Cr.) } & 800,000\end{array}$ On December 31, Year 7, Marla Company carried out an aging of its accounts receivable balances and estimated that the Year 7 ending balance of accounts receivable contained $9,000 of probable uncollectibles.It made adjusting entries appropriate for this estimate.Some of the $800,000 sales during Year 7 were for cash and some were on account; the omission is purposeful.
Required:
a. What was the balance in the Accounts Receivable account at the end of Year 6? Give the amount and whether debit or credit.
b. What was the balance in the Allowance for Uncollectible Accounts account at the end of Year 6? Give the amount and whether debit or credit.
c. What was bad debt expense for Year 7?
d. What was the amount of specific accounts receivable written off as being uncollectible during Year 7?
e. What were total cash collections in Year 7 from customers (for cash sales and collections from customers who had purchased on account in either Year 6 or Year 7)?
f. What was the net balance of accounts receivable included in the balance sheet asset total for December 31, Year 7?

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Definitions:

Repayment Patterns

The trends or habitual ways in which a borrower returns borrowed money to the lender, often analyzed in finance to assess risk and set terms.

Debt And Equity

The two main types of financing for companies, where debt involves borrowing money to be repaid and equity involves selling a stake in the company.

Capacity

The highest amount of production a business can maintain during a specific timeframe under regular conditions.

Collateral

Assets pledged by a borrower to secure a loan or credit, which can be seized by the lender in case of default.