Question

c. Compute the average collection period in days. Problems: Set A H Prepare journal entries related to bad debt cipele E NR.0 1, 2, 4) At December 31, 2019. House Co. reported the following information on its balance Sheet Accounts receivable S960,000 Less: Allowance for doubtful accounts 80.000 During 2020, the company had the following transactions related to receivables. 1. Sales on account $3.700,000 2. Sales returns and allowances 50.000 3. Collections of accounts receivable 2.810,000 4. Write-offs of accounts receivable deemed uncollectible 90.000 5. Recovery of bad debts previously written off as uncollectible 29.000 Instructions a. Prepare the journal entries to record each of these five transactions. Assume that no ca were taken on the collections of accounts receivable. b. Enter the January 1. 2020, balances in Accounts Receivable and Allowance for Doubtful Accounts. post the entries to the two accounts (use T-accounts), and determine the balances. c. Prepare the journal entry to record bad debt expense for 2020, assuming that an aging of accounts receivable indicates that expected bad debts are $115.000. d. Compute the accounts receivable turnover for 2020 assuming the expected bad debu information provided in (c). hift

Answer 1

a.

Credit ($) Transaction 1 Debit($) 3,700,000 Account Title and Explanation Accounts receivable Sales revenue (To record the sales on account) 3,700,000 50.000 50,000 Sales return and allowances Accounts receivables (To record return the sales return and allowances) 2,810,000 2,810,000 Cash Accounts receivables (To record the collection receivables) of 90.000 90,000 Allowance for doubtful account Account receivable (To record write-off of uncollectible account receivable) 5 29,000 Account receivable 1 Allowance for doubtful account To reverse write-off of receivables) 29.000 29.000 29,000 Cash Account receivable (To record the collection of cash on account, which is written off previously)

b.

Allowance for Doubtful Accounts (4) 90,000 80,000 29,000 Accounts Receivable Bal. 960,000 (2) 50,000 (1) 3,700,000 (3) 2,810,000 (5) 29,000 (4) 90,000 (5) 29,000 Bal. 1,710,000 (5) Bal. 19,000

c.

Date Credit Particulars Bad debt expense (115,000-19,000) Allowance for doubtful accounts Debit $96,000 $96,000

d.

Calculate the amount of net sales. Net credit sales = Sales on account -Sales return and allowances = $3,700,000-$50,000 = $3,200,000 Determine the beginning net accounts receivable. Beginning net accounts receivable Beginning accounts receivable - Beginning allowance for doubtful accounts = $960,000-$80,000 = $880,000 Determine the ending net accounts receivable. Ending net accounts receivable Ending accounts receivable - Ending allowance for doubtful accounts = $1,710,000-$115,000 = $1,595,000

Net credit sales Accounts receivable turnover = Average net account receivable Net credit sales Beginning net accounts receivable+ Ending net accounts receivable $3,200,000 ($880,000 = $1,595,000 = 2.59 times