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Goode and Devlin, a law firm, started 20X6 with accounts receivable of $31,000 and an allowance for uncollectible accounts of $4,200. The 20X6 service revenues on account totaled $157,000, and cash collections on account totaled $121,000. During 20X6, Goode and Devlin wrote off uncollectible accounts receivable of $3,200. At December 31, 20X6, the aging of accounts receivable indicated that Goode and Devlin will not collect $1,850 of its accounts receivable.
Journalize Goode and Devlin's (a) service revenue, (b) cash collections on account, (c) write-offs of uncollectible receivables, and (d) uncollectible-account expense for the year. Explanations are not required. Prepare T-account for Allowance for Uncollectible Accounts to show your computation of uncollectible-account expense for the year.
1) What are the notions of Moral Hazard and Adverse Selection?
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