Prepare journal entries related to bad debt expense, and compute ratios . At Dec
ID: 2476505 • Letter: P
Question
Prepare journal entries related to bad debt expense, and compute ratios.
At December 31, 2013, Dustin Company reported this information on its balance sheet.
During 2014, the company had the following transactions related to receivables.
Instructions
Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable. (Omit cost of goods sold entries.)
Enter the January 1, 2014, balances in Accounts Receivable and Allowance for Doubtful Accounts, post the entries to the two accounts (use T-accounts), and determine the balances.
Prepare the journal entry to record bad debt expense for 2014, assuming that aging the accounts receivable indicates that expected bad debts are $140,000.
Compute the accounts receivable turnover and average collection period.
Accounts receivable $960,000 Less: Allowance for doubtful accounts 78,000Explanation / Answer
1)
2)
3) Bad debts Expense debit $ 126000
allowance for doubtful debts credit $ 126000
4) Accounts receivable turnover = Net credit sales / Average accounts receivable
= $ 3450000 / 1043000
= 3.31 times
Average collection period = 365 days/ receivable turnover
= 365 / 3.31 = 110.27 days
S.No. Particulars debit $ credit $ 1 Accounts Recevable 3,600,000 Sales 3,600,000 2 Sales return and allowances 150,000 Accounts Recevable 150,000 3 Cash 3,100,000 Accounts Recevable 3,100,000 4 Allowance for Bad Debts 92,000 Accounts Recevable 92,000 5 Accounts Recevable 28,000 Allowance for Bad Debts 28,000 Cash 28,000 Accounts Recevable 28,000