Problem 9-1A (P9-1A) December 31, 2007, Leis Co. reported thefollowing information on its balance sheet.
Accounts receivable $960,000
Less: Allowance for doubtful accounts 80,000
During 2008, the company had the following transactions related toreceivables.
1. Sales on account $3,200,000
2. Sales returns and allowances 50,000
3. Collections of accounts receivable 2,810,000
4. Write-offs of accounts receivable deemed uncollectible90,000
5. Recovery of bad debts previously written off as uncollectible24,00 Compute the accounts receivable turnover ratio for 2008
Instruction
1. Prepare the journal entries to record each of these fivetransactions. Assume that no cash discounts were taken on thecollections of accounts receivable.
2. Enter the January 1, 2008, balances in Accounts Receivable andAllowance for Doubtful Accounts, post the entries to the twoaccounts (use T accounts), and determine the balances.
3. Compute the accounts receivable turnover ratio for 2008,assuming that aging of accounts receivables indicates that expectedbad debts are $115,000.
4. Compute the accounts receivable turnover ratio for 2008.
Problem 9-1A (P9-1A) December 31, 2007, Leis Co. reported thefollowing information on its balance sheet.
Accounts receivable $960,000
Less: Allowance for doubtful accounts 80,000
During 2008, the company had the following transactions related toreceivables.
1. Sales on account $3,200,000
2. Sales returns and allowances 50,000
3. Collections of accounts receivable 2,810,000
4. Write-offs of accounts receivable deemed uncollectible90,000
5. Recovery of bad debts previously written off as uncollectible24,00 Compute the accounts receivable turnover ratio for 2008
Instruction
1. Prepare the journal entries to record each of these fivetransactions. Assume that no cash discounts were taken on thecollections of accounts receivable.
2. Enter the January 1, 2008, balances in Accounts Receivable andAllowance for Doubtful Accounts, post the entries to the twoaccounts (use T accounts), and determine the balances.
3. Compute the accounts receivable turnover ratio for 2008,assuming that aging of accounts receivables indicates that expectedbad debts are $115,000.
4. Compute the accounts receivable turnover ratio for 2008.
Related questions
Adham Sdn. Bhd. accounts for its uncollectible accounts usingthe allowance method. The company reported the following accountbalances at 31 December 2017.
RM | |
Accounts receivable | 250,000 |
Less: Allowance for doubtful accounts | 12,500 |
During the year 2017, the company had the following transactionsrelated to receivables.
RM | |
1.Credit sales | 600,000 |
3.Collections of accounts receivable | 680,000 |
4.Write-offs of accounts receivable | 10,800 |
5.Recovery of bad debts previously written off | 3,000 |
Required:
a) Journalise transactions 1 - 5 above.
b) Post the entries to the two accounts: Accounts receivable andAllowance for doubtful account.
c) Record the bad debt expense for 2017 (in T-account) undereach of the following independent assumptions:
i. The company estimates its bad debt expense based on 5% ofoutstanding account receivable balance.
ii. The company bad debt estimate is 1% of its credit sales.
d) What is the net realisable value of Accounts Receivable at 31December 2017 under assumption (i) above.
Open the following selected accounts recording the opening balances as of January 1 of the current year.
| 114.1 | Allowance for doubtful accounts | 12,200 Credit |
| 313 | Income summary | |
| 718 | Bad debts expense |
3.Record the following transactions in general journal form in the Group Project Excel Spreadsheet Problem 2 Parts 2 - 6 tab.
4.Post these transactions to the three selected accounts above and to Accounts receivable.
5.Enter the ending balances in the three accounts above and enter the ending balance in the Accounts Receivable account.
| Apr 1, 09 | Accepted a $20,000, one - year, 8% note dated April 1 from Bruce Hanson for the sale of inventory; Cost of Goods Sold was $16,500. |
| June 27 | Wrote off the $2,375 balance owed by Miller Corp., which has no assets. |
| Oct. 5 | Received 25% of the $12,000 balance owed by F.M. Knox Co., a bankrupt, and wrote off the remainder as uncollectible. |
| Dec. 31 | Based on an analysis of the $257,724 of accounts receivable, it was estimated that $14,500 will be uncollectible. Record the adjusting entry using the Aging method. |
| Dec. 31 | Record the adjusting entry for interest accrued on the Bruce Hanson note |
| Dec. 31 | Record the entries to close the appropriate accounts into Retained Earnings. |
| April 1, 10 | Collected the maturity value on the Hanson note. |
6.Determine the net accounts receivable (the amount Summer expects to collect as of December 31.
7.Compute the accounts receivable turnover and the dayâs sales in receivables for the year. Assume that there were $1,800,000 sales account.
8.How is Summer Company doing with collection of their accounts receivable compared to the industry? Assume the industry average for the accounts receivable turnover is 11 and the industry average for the dayâs sales in receivables is 37 days?
