Question

At December 31, 2021, Cullumber Imports reported this information on its balance sheet.

Accounts receivable		$640,000
Less: Allowance for doubtful accounts		41,000

During 2022, the company had the following transactions related to receivables.

1.		Sales on account		$3,060,000
2.		Sales returns and allowances		50,000
3.		Collections of accounts receivable		2,760,000
4.		Write-offs of accounts receivable deemed uncollectible		42,000
5.		Recovery of bad debts previously written off as uncollectible		20,000

Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable. (Omit cost of goods sold entries.) (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Enter the January 1, 2022, balances in Accounts Receivable and Allowance for Doubtful Accounts, post the entries to the two accounts and determine the balances. (Post entries in the order of journal entries posted in the previous part)

Prepare the journal entry to record bad debt expense for 2022, assuming that aging the accounts receivable indicates that estimated bad debts are $47,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Compute the accounts receivable turnover. (Round answer to 1 decimal place, e.g. 12.4.)

Compute the average collection period. (Round answer to 1 decimal place, e.g. 12.4. Use 365 days for calculation.)

Answer 1

Part - a:

1.

To record entry for sales on account is:

C D Journal entry Serial No. Debit Credit - emin $3,060,000 Particualars Accounts receivable To Sales revenue (To record sales on account) $3,060,000

2.

To record entry for sales return is:

Journal entry Serial No. Debit Credit $50.000 Particualars Sales return and allowances To Accounts receivable (To record sales return and allowances) $50.000

3.

To record entry for received amount for accounts receivable is:

ДА 14 Serial No. Credit Journal entry Particualars Cash To Accounts receivabe (To record collection of accounts receivable) Debit $2.760.000 $2.760,000

4.

To record entry for write-off accounts receivable is:

Serial No. Credit Journal entry Particualars Allowance for doubtful accounts To Accounts receivable (To record write-off accounts receivable) Debit $42.000 $42.000

5.

To record entry for bad debt amount recovered is:

Serial No. Credit Journal entry Particualars Accounts receivable To Allowance for doubtful accounts (To record recovery of bad debts) Debit $20,000 $20,000

31 32 Serial No. Credit Journal entry Particualars Cash To Accounts receivable (To record collection of accounts receivable) Debit $20,000 34 $20,000

Part - b:

1.

Computation the balance of accounts receivable is:

Date Accounts Receivable Particulars Amount Date Particulars Amount To Balance b/d S640,000 2 By Sales return and allowances $50,000 1 To Sales Revenue $3,060,000 3 By Cash $2.760,000 5 To Allowance for dountful debts $20,000 4 By Allowance for dountful debts $42.000 5 By Cash $20,000 Balance $848,000

Hence, the balance of accounts receivable is $848,000.

2.

Computation the balance of allowance for doubtful accounts is:

Date Particulars 4 To Accounts Receivable Allowance for Doubtful Debts Amount Date Particulars $42.000 By Balance cd 5 By Accounts Receivable Balance Amount $41.000 $20,000 $19.000

Hence, the balance of allowance for doubtful accounts is $19,000.

Part - c:

To record entry for expenses for bad debt at 2022 is:

37 Serial No. Debit Credit Journal entry Particualars Bad Debts Expense To Allowance for Doubtful Accounts (To record bad debts expense) $28.000 $28.000

Working Note:

Computation of adjustment amount is:

Adjustment amount = Balance Required for bad debts - Amount before adjustments

= $47,000 - $19,000

= $28,000

Hence, the adjustment amount is $28,000.

Part - d:

Computation of accounts receivable turnover is:

Accounts receivable turnover = Sales revenue / Average accounts receivable

= $3,010,000 / $700,000

= 4.3 times

Hence, the accounts receivable turnover is 4.3 times.

Working Notes:

1.

Computation of sales revenue is:

Sales revenue = Total sales - Sales return and allowances

= $3,060,000 - $50,000

= $3,010,000

Hence, the sales revenue is $3,010,000.

2.

Computation of beginning accounts receivable is:

Beginning accounts receivable = Total accounts receivable - Allowance for doubtful accounts

= $640,000 - $41,000

= $599,000

Hence, the beginning accounts receivable is $599,000.

3.

Computation of ending accounts receivable is:

Ending accounts receivable = Total accounts receivable - Bad debts

= $848,000 - $47,000

= $801,000

Hence, the ending accounts receivable is $801,000.

4.

Computation of average accounts receivable is:

Average accounts receivable = (Beginning accounts receivable + Ending accounts receivable) / 2

= ($599,000 + $801,000) / 2

= $1,400,000 / 2

= $700,000

Hence, the average accounts receivable is $700,000.

Part - e:

Computation of average collection period is:

Average collection period = Number of days annually / Accounts receivable turnover

= 365 / 4.3

= 84.8 days

Hence, average collection period is 84.8 days.