I need help.thanks I also posted the templates for the assignment. tia . adjust
ID: 2512969 • Letter: I
Question
I need help.thanks I also posted the templates for the assignment. tia
. adjust the allowance for doubtful accounts P6-7 Aging Accounts Receivable On September 30, 2016 (the end of its fiscal year), Lufkin Corporation reported LO6.4 accounts receivable of $331,750 and an allowance for doubtful accounts of $16,700. During fiscal 2017, the fol- LO 6.5 lowing transactions occurred Credit sales (terms, n/EOM Collections on accounts receivable Accounts receivable written off $2,017,800 1,956,000 16,200 On September 30, 2017, an aging of the accounts receivable balance indicated the following: Age Amount Under 30 days 30-90 days 91-180 days 181-360 days Over 360 days $169,250 100,000 55,900 38,200 14,000 $377,350 Estimated Percentage Uncollectible 0.8% 1.6 5.0 15.0 40.0 Required: e the journal entries necessary to record the credit sales, collections on account, write-off of accounts re- 1. Prepar ceivable, and bad debts expense for Lufkin for fiscal 2017. (continued)Explanation / Answer
1.
Journals
Date
Account titles and explanation
P.ref
Debit
Credit
Year, 2017
Accounts receivable
$2,017,800
Sales revenue
$2,017,800
To record sales on credit during the year
Year, 2017
Cash
$1,956,000
Accounts receivable
$1,956,000
To record collection of cash out of accounts receivable
Year, 2017
Allowance for doubtful account
$16,200
Accounts receivable
$16,200
To record write-off of accounts receivable
Calculation of bad debt expense:
Target balance = Estimated percentages on aging amount
= (169,250 × 0.8%) + (100,000 × 1.6%) + (55,900 × 5%) + (38,200 × 15%) + (14,000 × 40%)
= 1,354 + 1,600 + 2,795 + 5,730 + 5,600
= 17,079
Bad debt expense = Target balance – Unadjusted credit balance on allowance account
= 17,079 – 16,700
= 379
Journal
Date
Account titles and explanation
P.ref
Debit
Credit
Year, 2017
Bad debt expense
$379
Allowance for bad debt
$379
To record Bad debt expense for the period
2.
Accounts receivable (30/09/2017) = Beginning balance + Credit sales – Collections – Write off
= 331,750 + 2,017,800 – 1,956,000 – 16,200
= $337,350 (Answer)
Allowance for doubtful (30/09/2017) = Beginning balance – Write off + Bad debt expense
= 16,700 – 16,200 + 379
= 879
Balance sheet (partial)
As at 30/09/2017
Asset
$
Accounts receivable
337,350
Less: Allowance for doubtful debts
879
Net realizable value
336,471
3.
Receivable turnover = (Average accounts receivable / Net credit sale) × 365
Average accounts receivable = (Beginning net realizable value of accounts receivable + Ending net realizable value of accounts receivable) ÷ 2
= {(331,750 – 16,700) + 336,471} ÷ 2
= (315,050 + 336,471) ÷ 2
= 651,521 ÷ 2
= 325,760.5
Receivable turnover = (325,760.5 / 2,017,800) × 365
= 58.926….
= 59 days (rounded to whole number) [Answer]
Evaluation: The collection policy is not good, since it is high as 59 days; the collection should be within 30 days for better result.
Date
Account titles and explanation
P.ref
Debit
Credit
Year, 2017
Accounts receivable
$2,017,800
Sales revenue
$2,017,800
To record sales on credit during the year
Year, 2017
Cash
$1,956,000
Accounts receivable
$1,956,000
To record collection of cash out of accounts receivable
Year, 2017
Allowance for doubtful account
$16,200
Accounts receivable
$16,200
To record write-off of accounts receivable