Problem 8-2A (Part Level Submission) At December 31, 2016, Indigo Corporation Im
ID: 2561765 • Letter: P
Question
Problem 8-2A (Part Level Submission) At December 31, 2016, Indigo Corporation Imports reported this information on its balance sheet. Accounts receivable 652,800 38,030 Less: Allowance for doubtful accounts During 2017, the company had the following transactions related to receivables. 1. Sales on account 2. Sales returns and allowances 3. Collections of accounts receivable 4. Write-offs of accounts receivable deemed uncollectible 5. Recovery of bad debts previously written off as uncollectible $2,883,800 85,386 2,592,000 44,010 14,500Explanation / Answer
Account receivable turnover ratio=net credit sales/average account receivables
Beginning net account receivable=652,800-38,030=$614,770
Net credit sales=$2,883,800-$85,386=$2,798,414
Balance in account receivable:
=Beginning balance+credit sales+reinstate bad debt-sales reurns-collections-written off - collected
=$652,800+2,883,800+14,500-85386-2,592,000-44,010-14,500
=$815,204
Allowance for doubtful account balance:
= Beginning balance+reinstate bad debt-write offs
=$38,030+14,500-44,010
=$8,520
Ending net receivables=815,204-8520=$806,684
Average account receivable=( 806,684+614,770)/2=710,726
Acciunt receivable turnover Ratio=2,798,414/710,726
=3.94 times
In this no information is given about this year bad debt expense so no adjustment is made regarding that.