Question

PLease identify the following for Events 1-4 based on Exercise 5-5: the impact on the accounting equation, please define if and how it affects net income, and please define if and how it affects cash. With your answers, please explain your reasoning and how you solved the problem. This is especially important for Events 3 and 4 because they involve contra-asset accounts.

5-5: Analyzing financial statement effects of accounting for uncollectible accounts using the percent of revenue allowance method
Grover Inc. uses the allowance method to account for uncollectible accounts expense. Grover Inc. experienced the following four accounting events in 2018:
1.   Recognized $92,000 of revenue on account.

2.   Collected $78,000 cash from accounts receivable.

3.   Wrote off uncollectible accounts of $720.

4.   Recognized uncollectible accounts expense. Grover estimated that uncollectible accounts expensewill be 1 percent of sales on account.

Answer 1