Question

nformation on its balance PROBLEMS: SET A Prepare journal entries related P8-1A At December 31, 2016, House Co. reported the following information on to bad debt expense. sheet. TO $960,000 (LO 1, 2, 4) Accounts receivable 80,000 Less: Allowance for doubtful accounts During 2017, 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 f uncollectible 29.000 Instructions (a) Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable. (b) Accounts receivable (b) Enter the January 1, 2017, balances in Accounts Receivable and Allowance for Doubt- $1,710,000 ful Accounts, post the entries to the two accounts (use T-accounts), and determine the ADA $19,000 balances. (d Bad debt expense $96.000 (c) Prepare the journal entry to record bad debt expense for 2017, assuming that an aging of accounts receivable indicates that expected bad debts are $115,000. (d) Compute the accounts receivable turnover for 2017, assuming the expected bad information provided in (c).

Answer 1

No.	Account titles and explanations				Debit	Credit
1)	Accounts receivable				3,700,000
	sale					3,700,000
2)	Sales return and allowance				50,000
	Accounts receivable					50,000
3)	Cash				2,810,000
	Accounts receivable					2,810,000
4)	Allowance for doubtful accounts				90,000
	Account receivable					90,000
5)	Accounts receivable				29,000
	Allowance for doubtful accounts					29,000
	cash				29,000
	Accounts receivable					29,000
	T-Account
	Account receivable
	BB	960,000	2)	50,000
	1)	3,700,000	3)	2,810,000
	5)	29,000	4)	90,000
			5)	29,000
	End bal	1,710,000
	Allowance for Doubtful accounts
	4)	90,000	BB	80,000
			5)	29,000
			end bal	19,000
	Account titles and explanations				Debit	Credit
	Bad debts expesne				96,000
	Allowance for Doubtful accounts					96,000
	(115000-19000)
				opening	ending
	Accounts receivable			960,000	1,710,000
	less allowance for doubtful			-80,000	-115000
	net realizable value			880,000	1,595,000
	Average account receivable (880000+1595000)/2
				1237500
	Accounts receivable turnover = net sales/account receivable turnover
				(3,700,000-50,000)/1237500
				2.95