Question

mbntohomooolnola P8.1 (LO 1, 2, 4) At December 31, 2019, Catu Medical reported the following information on its ov 12n bon 18 statement of financial position. R$960,000 Accounts receivable Less: Allowance for doubtful accounts bioe aboou lo 1202 anoitoutan 80,000 ongl) wingu2 ad n xilamuol During 2020, the company had the following transactions related to receivables. R$3,700,000 211on 1. Sales on account those 50,000 quo 19dsbsol anouoPnat 2. Sales returns and allowances 3. Collections of accounts receivable 2,810,000 4. Write-offs of accounts receivable deemed uncollectible 90,000 hnom-ST000 em bs isoo sld 29,000 on 1dal sl no 1e95tni bouoA 5.Recovery of bad debts previously written off as uncollectible inuooon TE s Instructions 120101ni od bool E 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. 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 R$115,000. O booD botgsoA SO d. Compute the accounts receivable turnover for 2020 assuming the expected bad debt information provided in (c).

Answer 1

Answer to part (a)
In the books of Catu Medical
Journal Entries
Sl no.	Description	Debit	Credit
1	Accounts Receivable	$    37,00,000
	Sale		$    37,00,000
	(being sales accounted)
2	Sales Return & allowances	$          50,000
	Accounts Receivable		$          50,000
	(being sales return recorded)
3	Cash	$    28,10,000
	Accounts Receivable		$    28,10,000
	(being cash received from customers)
4	Allowance for Doubtful debts	$          90,000
	Accounts Receivable		$          90,000
	(being amount written off )
5	Accounts Receivable	$          29,000
	Allowance for Doubtful debts		$          29,000
	(being previously written off now written back)
	Cash	$          29,000
	Accounts Receivable		$          29,000
	(being recovery recorded)
Answer to part (b)
Accounts Receivable
Date	Description	Amount(in $)	Date	Description	Amount(in $)
2020			2020
Jan-01	Opening balance	9,60,000		Sales Return & allowances	50,000
	Sale	37,00,000		Cash	28,10,000
	Allowance for Doubtful debts	29,000		Allowance for Doubtful debts	90,000
				Cash	29,000
			Dec-31	Closing balance	17,10,000
		46,89,000			46,89,000
Allowance for Doubtful debts
Date	Description	Amount(in $)	Date	Description	Amount(in $)
2020			2020
	Accounts Receivable	90,000	Jan-01	Opening balance	80,000
				Accounts Receivable	29,000
Dec-31	Closing balance	19,000
		1,09,000			1,09,000
Answer to part ( c)
	Bad debts	$      1,15,000
	Allowance for Doubtful debts		$      1,15,000
	(being estimated bad debts recorded)
Answer to part (d)
Accounts Receivable turnover = Net Credit sales/ Average Accounts Receivable
Net Credit Sale = Gross credit Sale- Sales Return & allowances
	=3700000-50000
	=3650000
Average Accounts Receivable
Opening Accounts receivable =960000-80000
	=880000
Closing Accounts Receivable = 1710000-19000-115000
	=1576000
Average accounts receivable =( Opening balance +closing balance)/2
	=(880000+1576000)/2
	=832000
Accounts Receivable turnover = 36,50,000/8,32,000
	=4.39