Tyler Service Co. experienced the following transactions for 2014, its first year of operations: 1. Provided $86,000 of services on account. 2. Collected $72,000 cash from accounts receivable. 3. Paid $39,000 of salaries expense for the year. 4. Tyler adjusted the accounts using the following information from an accounts receivable aging schedule:

Number of Days Amount % to Be Uncollectible Allowance Balance
Current $7,500 .01
0-30 2,000 .05
31-60 1,500 .10
61-90 1,000 .30
Over 90 days 2,000 .50

Organize the information in accounts under an accounting equation

Assets   =  Liaiblities + Equity

     Cash        A/R   Allowancwe = Revenues - Salaries - bad debt

1                  86000                   86,000

2        72,000 (72,000)                    

3       (39,000)                                      (39,000)

4               (1,625)                                              (1,625)

Totals 33,000 + 14,000 - 1,625  =    86,000 - 39,000 - 1,625

                       45,375.00                      45,375.00

Explanation:

We multiply the outstanding account receivable by their probability accordign to the aging stimations.

7,500 x 0.01   =     75

2,000 x 0.05 =    100

1,500 x 0.10   =    150

1,000 x 0.30 =    300

2,000 x 0.50 = 1,000  

Total                  1,625

This amount decreases the net amount of recievables and recognize a bad debt expense for that amount as well.

Then, we add up the assets (cash and net receivables)

and make sure it matches our equity accounts (revenues less expenses)

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