Question

Geisel, Inc. reported net sales revenue of $525,000 in 2018 and $617,000 in 2019. The company's ending net receivables were $124,000 during 2017 and $140,000 during 2018. At December 31, 2019, the company had Accounts Receivable of $138,000 and an unadjusted debit balance in its Allowance for Doubtful Accounts account of $1,500. The company reported Bad Debt Expense of $8,560 during 2019. Required: a. Determine the net receivables at December 31, 2019. b. Calculate the receivables turnover ratio for 2018 and 2019. c. Calculate the days to collect for 2018 and 2019.

Answer 1

Question 1

A -Net Receivables will be = 127940

Adjusted Balance of Allowance Account = Debit of 1500

Bad Debt Expense = 8560

Adjusted balance will be = 1500 + 8560 = 10060

Net Receivable = 138000 - 10060 = 127940

B - Accounts Receivable Turn Over Ratio

Net Sales / Average Accounts receivable

2018 - 525000 / 132000 = 3.98

2019 - 617000 / 125970 = 4.90

C-

Days To collect Accounts Recievable

= 365 Days / Accounts Receivable Turn Over Ratio

2018 - 365 / 3.98 = 91.71 Days

2019 - 365 / 4.90 = 74.49 Days

Question 2

Estimated amount found by Receivables x % of uncollectables

Number Days Unpaid	Total Accounts Receivable	Historical Uncollectables	Amount
Not yet Due	127,500	4%	5,100
1 - 30 Days	90,200	11%	9,922
31 - 60 Days	54,600	17%	9,282
Over 60 Days	32,800	35%	11,480
Total Estimated Amount	35784

Allowance accounts has credit balance of 29247. So this amount will deduct from the estimated amount and remaining balance will show as Bad debt expense

35784 - 29247 = 6537

Date	Accounts and Explanation	Debit	Credit
July 31 -2019	Bad Debt Expense A/c	6,537
	Allowance on Accounts Receivable A/c		6,537
	(Estimation of accounts receivable)

2.

Date	Accounts and Explanation	Debit	Credit
August 15 - 2019	Allowance on Accounts Receivable A/c	3,181
	Accounts Receivable A/c		3,181
	Written off amount

3.

Allowance Accounts
Particulars	Amount	Particulars	Amount
		Opening Balance	29,247
Written Off	3,181	bad debt expense	6,537
Balancing Figure	32,603
	35,784		35,784