Financial statement reporting of accounts receivable:
Accounts receivable are reported as current assets
on the balance sheet as follows.
|
Christopher Corporation |
||
|
Assets |
|
|
|
Current Assets |
|
|
|
Cash and Cash Equivalents |
|
$10,000 |
|
Accounts Receivable |
$67,000 |
|
|
Less: Allowance for Uncollectible Accounts |
17,000 |
50,000 |
|
Merchandise Inventory |
|
270,000 |
|
Total Current Assets |
|
$330,000 |
|
Property, Plant, and Equipment |
|
|
|
Land |
|
$70,000 |
|
Buildings |
|
220,000 |
|
Machinery and Equipment |
|
340,000 |
|
Total Property, Plant, and Equipment |
|
$630,000 |
|
Other Assets |
|
10,000 |
|
Total Assets |
|
$970,000 |
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
Liabilities |
|
|
|
Current Liabilities |
|
|
|
Accounts Payable |
|
$135,000 |
|
Income Taxes Payable |
|
25,000 |
|
Wages Payable |
|
10,000 |
|
Total Current Liabilities |
|
$170,000 |
|
Long-term Liabilities |
|
340,000 |
|
Total Liabilities |
|
$510,000 |
|
|
|
|
|
Stockholders' Equity |
|
|
|
Common Stock |
|
$350,000 |
|
Retained Earnings |
|
110,000 |
|
Total Stockholders' Equity |
|
$460,000 |
|
Total Liabilities and Stockholders' Equity |
|
$970,000 |
The Christopher Corporation's balance sheet shows accounts receivable of $67,000 and a $17,000 allowance for uncollectible accounts. The accounts receivable balance means the company's customers owe it $67,000. The allowance for uncollectible accounts balance means the company expects to be unable to collect $17,000 from its customers. As a result, the company expects to be able to collect $50,000 ($67,000 - $17,000) from its customers. It is this $50,000 expected cash receipts that the company's management would use in planning its future cash expenditures.
On the income statement, several accounts affected
by accounts receivable are reported, as shown below. Net sales include cash
sales and credit sales less sales returns and allowances resulting from products
sold being returned by customers. Finally, the uncollectible accounts expense
is reported as an operating expense.
|
Christopher Corporation |
|
|
Net Sales |
$600,000 |
|
Cost of Goods Sold |
360,000 |
|
Gross Profit |
$240,000 |
|
Operating Expenses |
|
|
Supplies Expense |
$13,000 |
|
Wages Expense |
131,000 |
|
Insurance Expense |
15,000 |
|
Rent Expense |
24,000 |
|
Uncollectible Accounts Expense |
12,000 |
|
Total Operating Expenses |
$195,000 |
|
Operating Income |
$45,000 |
|
Other Revenues and (Expenses) |
1,000 |
|
Income Before Taxes |
$46,000 |
|
Income Taxes Expense |
16,000 |
|
Net Income |
$30,000 |
** You now have the background to do text exercises 7.8 and 7.10 and
problems 7.1 and 7.2.
Financial Reporting Summary
The following table summarizes the relationships among the major topics
examined in this and previous chapters. The numbers in parentheses refer to the
chapters in which the topics were discussed.
|
Resources |
= |
Sources of Resources |
||
|
Assets |
= |
Liabilities |
+ |
Stockholders' Equity |
|
Current Assets |
|
|
|
Revenues |