Question

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PART 1 The following information is available for a company as of January 1, 2019: Accounts Receivable Allowance for Doubtful Accounts Accounts Receivable (net) $300,000 (8,000) 292,000 The following events took place during 2019: 1. During the year, the company sold services for $600,000 cash and $2,800,000 on credit. 2. On December 31, a decision was made to estimate bad debts as 1% of credit sales. 3. Accounts Receivable of $3,000 from prior years was determined to be uncollectible and was written off as a bad debt. 4. The company collected $2,700,000 of cash from accounts receivable. Required A. Record the four events above that took place during 2019 in journal entry form. B. Determine the Accounts Receivable (net) amount as of December 31, 2019. Show your work C. Determine the receivables turnover ratio for 2018 and 2019. Credit sales for 2018 amounted to $2,000,000 and Accounts Receivable (net) as of December 31, 2017 was $250,000. Based or the turnover ratio, which year did the firm better manage its Accounts Receivable?

Answer 1

Debit A 1 A. 2 Particulars 3 1 Cash Accounts Receivable To Service Revenue (Being Sale of services Accounted) Credit 600000 2800000 3400000 8 28000 2 Bad Debt Expense To Allowance for Doubtful Accounts (Being bad debt estimated at 1% of Credit Sales) 28000] 3000 3 Allowance for Doubtful Accounts To Accounts Receivable (Being uncollectible debt written off) 3000 15 16 2700000 4 Cash To Accounts Receivable (Being cash received from debtors) 27000001

20 B. 21 Accounts Receivable 22 23 Opening as on January 1,2019 24 Credit Sales during the year 25 Less: Bad Debt written off 26 Less: Cash Collected 27 Less:Allowance for Doubtful Accounts 28 Accounts Receivable (Net) 3000001 2800000 -3000 -2700000 -33000 364000 29 8000 -3000 28000 33000 30 Note: 31 Allowance for Doubtful Accounts 32 Opening 33 Less: Bad Debt written off 34 Add: Bad debt estimated during the year 35 Closing 36 37 C. 38 Receivables turnover 39 40 Receivables turnover(in days) 41 42 43 Credit Sales 44 45 Accounts Receivable (net) Average account receivable was 46 collected (in days) 47 2019 2018 8.547.38 2017 2019 2800000 2018 2000000 364000 292000 2500001 42.8) 49.5 (in days)

А c 1 A. Credit Particulars Cash Accounts Receivable To Service Revenue (Being Sale of services Accounted) Debit 600000 2800000 =C3-C4 =2800000*1% Bad Debt Expense To Allowance for Doubtful Accounts (Being bad debt estimated at 1% of Credit Sales) 3000 Allowance for Doubtful Accounts To Accounts Receivable (Being uncollectible debt written off) =C12 16 4 2700000 Cash To Accounts Receivable (Being cash received from debtors) =C16

20 B. 21 Accounts Receivable 23 Opening as on January 1,2019 24 Credit Sales during the year 25 Less: Bad Debt written off 26 Less: Cash Collected 27 Less:Allowance for Doubtful Accounts 28 Accounts Receivable (Net) 300000 2800000 -3000 -2700000 -33000 =SUM(B23:B27) 29 8000 30 Note: 31 Allowance for Doubtful Accounts 32 Opening 33 Less: Bad Debt written off 34 Add: Bad debt estimated during the year 35 Closing 36 37 C. 38 Receivables turnover -3000 28000 =SUM(B32:B34) 2019 2018 =2800000/((364000+292000)/2) I=2000000/((292000+250000)/2) 40 Receivables turnover(in days) 2017 2019 2800000 2018 2000000 43 Credit Sales 44 45 Accounts Receivable (net) Average account receivable was collected 46 (in days) 27 364000 292000 250000 =365/B40 =365/040 (in days)