Project #60719 - Case Study



Wally’s Wallpaper Company sells wallpaper, installed on the customer’s wall. Wally does not stock the wallpaper, but buys it after the customer has made a selection. During April, his company picked up 500 rolls of wallpaper from the wholesale house and installed all 500 rolls, charging the customers $10 per roll, installed. At the end of the month, he had collected for all of his sales except for the sale to one customer (Uncle George), who still owed him for 25 rolls. Wally has a charge account at the wholesale house, which charges him $4 per roll. He has paid for 350 of those wallpaper rolls and still owes the wholesaler for 150 rolls. During April, Wally’s company also has these transactions:

·         The company pays April rent of $300 for its small office.

·        The company receives a telephone bill for $120 but does not  pay it until May 5

·        Hot weather is coming, so Wally signs up for a drinking water service. He writes a company check for $175. Of that, $50 is for a bottle of water, and $125 is a deposit on the cooler that holds the bottle of water. (When and if the cooler is returned to the water company, the deposit will be refunded to Wally’s company.)

·        Wally has one helper, Jack. Jack started with the company in late March and earned $300 in March and $800 in April. The company pays Jack on the first day of the month for all the work performed the previous month. In this computation, pretend the year is 1928—there is no social security or income tax withheld. Jack is paid his entire salary, with no deductions. (Remember, this is pretend, to make it simple. Do not pay your employees this way in these modern, IRS afflicted times.)

Make up two reports for Wally’s Wallpaper Company: (1) A cash receipts and disbursements report for April and (2) an accrual basis income and expense report for April.


 As of October, Wally’s Wallpaper Company has the following transactions relating to sales and bad debts during the year (total sales for the year were $72,000, broken down as shown in the accompanying schedule):


  • Wally estimates his bad debts will be 2 percent of sales and maintains an allowance for bad debts based on that assumption. 
  • In May, a customer who owed him $500 files for bankruptcy, so Wally will never collect that debt. 

In October, a customer (who was renting the house in which Wally hung some wallpaper) skips out of town. No one can  find him, so Wally assumes he will never collect that debt, which is $800.Your assignment: Make up a schedule of sales, the resulting increases in the allowance for bad debts, and the write-off of bad debts.

(I’ve started the format for you.)Accumulated Bad debt Bad debts allowance for Month Sales expense incurred bad debts



Month                            Sales               Bad debt              Bad debt             Accumulated allowance  

                                                             Expense                incurred             for bad debts


                                                                                                                        $                  600

Beginning balance                                                          

January                   $ 4, 000                            

February                    6, 000                

March                        5, 000                 

April                          7, 000                

May                           9. 000                  

June                           5, 000                  

July                            3, 000                  

August                       4. 000                  

September                  8, 000                    

October                      10,000                   

November                   9, 000                  

December                    2, 000               

             Totals            $72,000


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Due By (Pacific Time) 03/07/2015 12:00 am
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