Question

 Question 3

At December 31, 2017, Crown Point Imports Inc. reported this information on its balance sheet.

 Accounts receivable

 $616,000

 Less: Allowance for doubtful accounts 44,000 During 2018, the company had the following summary transactions related to receivables and sales. Crown Point uses the perpetual inventory

 system.

 1. Sales on account amounted to $2,339,000. The cost of the inventory sold was $2,151,880. 2. Sales returns and allowances with a total sales price of $39,000 and a cost of $35,880 were

 restored to inventory.

 3. Collections of accounts receivable were $2,061,000.

 4. Write-offs of accounts receivable deemed uncollectible, $49,200.

 5. Recovery of bad debts previously written off as uncollectible, $15,900.

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Answer 1

In the books of Crown Point Imports Inc. :

Transaction / Event	Account Titles and Explanations	Debit	Credit
		$	$
1.	Accounts Receivable	2,339,000
	Sales		2,339,000
	To record sales on account
1.	Cost of Goods Sold	2,151,880
	Inventory		2,151,880
	To record cost of goods sold
2.	Sales Returns and Allowances	39,000
	Accounts Receivable		39,000
	To record return of goods sold
2.	Inventory	35,880
	Cost of Goods Sold		35,880
	Cost of goods returned to inventory
3.	Cash	2,061,000
	Accounts Receivable		2,061,000
	To record collection from credit customers
4.	Allowance for Doubtful Accounts	49,200
	Accounts Receivable		49,200
	To write off uncollectible accounts receivable
5.	Accounts Receivable	15,900
	Allowance for Doubtful Accounts		15,900
	To reistate accounts receivable previously written off
5	Cash	15,900
	Accounts Recevable		15,900
	To record recovery of bad debts

2.

Accounts Receivable
Bal Dec 31, 2017	616,000	2.	39,000
1.	2,339,000	3.	2,061,000
5.	15,900	4.	49,200
		5.	15,900
Bal. Dec 31, 2018	805,800
Allowance for Doubtful Accounts
4.	49,200	Bal Dec 31, 2017	44,000
		5.	15,900
		Bad Debt Expense	34,600
		Bal Dec 31, 2018	45,300

Adjusting entry:

Date	Account Titles	Debit	Credit
		$	$
Dec 31, 2018	Bad Debt Expense	34,600
	Allowance for Doubtful Accounts		34,600

Receivables Turnover Ratio = Net Sales / Average Net Accounts Receivable = $ ( 2,339,000 - 39,000 ) / ( 572,000 + 760,500) / 2 = $ 2,300,000 / $ 666,250 = 3.5 times

Average collection period = 365 / 3.5 = 104 days.