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Question 1 (21 score) Recording and Reporting Allowance for Doubtful Accounts Using the Percentage of Credi Sales and Aging of Accounts Receivable Methods Innovative Tech Inc. (ITT) uses the percentage of credit sales method to estimate bad debts each month and then uses the aging method at year-end. During November, IIT sold services on account for $100,000 and estimated that % of one percent of those sales would be uncollectible. At its December 31 year end, total Accounts Receivable is $89,000, aged as follows: () 1-30 days old, $75,000: (2) 31-90 days old, $10,000, and (3) more than 90 days old, $4,000 Experience has shown that for each age group, the average rate of uncollectibility is (1) 10 percent, (2) 20 percent, and (3)40 percent, respectively. Before the end-of-year adjusting entry is made, the Allowance for Doubtful Accounts has a $1,600 credit balance at December 31 Required: 1. Prepare the November adjusting entry for bad debts 2. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts. 3. Prepare the December 31 adjusting entry 4. Show how the various accounts related to accounts receivable should be shown on the December 31 balance sheet
Question 3 (15 scores) Groucho, Harps, and Chico go into partnership on January 1, 2015. Groucho contributes 90,000, Harpo $70,000, and Chico $40,000 to a business called Mars Brothers Partnership On a monthly basis, each partner is allocated income and is allowed to receive cash from the business in proportion to the capital they provided. Assume that Groucho receives $2,700 cash per month Required: Parta Prepare the journal entry for the initial investment. Part b. Determine the monthly distribution amounts for each of the three partners Part c. Prepare the journal entry that would be made in one month for the monthly Part d. Prepare the journal entry for the allocation of an annual net income of $$4,000. For purposes of this journal entry, assume Sales Revenue totaled $116,000 and that all expenses totaling $32,000, were recorded in a single account called Operating Expenses. Parte. Prepare the journal entry to close the Drawings accounts at the end of the year Part f. Prepare a Statement of Parthers Equity (assume no additional investments made).
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