Homework Answers
A. Percentage of sales method
1. Bad Debt expense = $195000 x .5% = $975
| Account Titles | Debit | Credit |
| Bad Debt Expense | $ 975 | |
| Allowance for Uncollectible accounts | $ 975 |
2. Ending Balance of Allowance for uncollectible accounts = $223 + $975 = $1198
3. Net Realizable Value of accounts receivable = $68000- $1198 = $66802
4. Receivable turnover ratio = Net Sales / Average Accounts
Receivable
= $195000 / $61289.50 = 3.18
Average Accounts Receivable = ($56000-223+68000-1198)/2 =
$61289.50
Days sales to collect = Ending Account Receivables / Sales x
365
= $66802 / $195000 x 365 = 125.04 days
B. Aging of Receivables approach
2. Ending Balance of Allowance for Uncollectible accounts = $3508.50
| 1-30 days | $ 36,000 | 1.75% | $ 630.00 |
| 31-60 days | $ 22,000 | 4.80% | $ 1,056.00 |
| 61-90 days | $ 7,500 | 11.30% | $ 847.50 |
| 91+ days | $ 2,500 | 39% | $ 975.00 |
| $ 3,508.50 |
1. Bad Debt expense = $3508.50 - $223 = $3285.50
| Account Titles | Debit | Credit |
| Bad Debt Expense | $ 3,285.50 | |
| Allownace for Uncollectible accounts | $ 3,285.50 |
3. Net Realizable Value of accounts receivable = $68000- $3508.50 = $64491.50
4. Receivable turnover ratio = Net Sales / Average Accounts
Receivable
= $195000 / $60134.25 = 3.24
Average Accounts Receivable = ($56000-223+68000-3508.50)/2 =
$60134.25
Days sales to collect = Ending Account Receivables / Sales x
365
= $64491.50 / $195000 x 365 = 120.71 days
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