Prepare journal entries related to bad debt expense, and compute ratios.
accounts receivable $600,000 less: allowance for doubtful accounts 37,000 during 2022, the company had the following transactions related to receivables.
1. sales on account $2,500,000
2. sales returns and allowances 50,000
3. collections of accounts receivable 2,200,000
4. write-offs of accounts receivable deemed uncollectible 41,000
5. recovery of bad debts previously written off as uncollectible 15,000
a) 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.)
b) enter the january 1, 2022, balances in accounts receivable and allowance for doubtful accounts, post the entries to the two accounts (use t-accounts), and determine the balances. a/r bal. $809,000
c) prepare the journal entry to record bad debt expense for 2022, assuming that aging the accounts receivable indicates that estimated bad debts are $46,000.
d) compute the accounts receivable turnover and average collection period.
I believe the answer is B
Usually if there is a negative with regards to balance it represents debt.
1. Depreciation on the equipment for the month of January is calculated using the straight-line method. At the time the equipment was purchased, the company estimated residual value of $4,700 and two-year service life.
Equipment cost = 18,500 - 4,700 (residual value) = 13,800 / 24 months = $575 per month
January 31, depreciation expense
Dr Depreciation expense 575
Cr Accumulated depreciation - equipment 575
2. The company estimates the future uncollectible accounts. The company determines $18,000 of accounts receivable on January 31 are past due, and 30% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 5% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.)
total accounts receivable Jan. 31 = 47,600 (beginning) + 142,000 - 126,100 - 5,500 + 135,000 = 193,000
overdue balance = 18,000
current accounts balance = 193,000 - 18,000 = 175,000
total bad debt = ($18,000 x 30%) + ($175,000 x 5%) = $5,400 + $8,750 = $14,150
January 31, bad debt expense
Dr Bad debt expense 14,150
Cr Allowance for doubtful accounts 14,150
3. Accrued interest expense on notes payable for January.
4. Accrued income taxes at the end of January are $13,700.
notes payable $57,000 x 6% x 1/12 = $285
January 31, interest expense
Dr Interest expense 285
Cr Interest payable 285
5. By the end of January, $3,700 of the gift cards sold on January 2 have been redeemed.
January 31, accrued revenue
Dr Unearned revenue 3,700
Cr Sales revenue 3,700
The formula for calculating the current ratio is as follows:
Current ratio = Current assets / Current liabilities (1)
From the question, we have:
Current assets = Accounts Receivable + Cash + Inventory + Supplies = $81,336 + $73,324 + $25,816 + $5,512 = $185,988.
Note: Equipment is not a current asset but a fixed asset.
Current liabilities = Accounts Payable + Income Tax Payable + Wages Payable = $19,207 + $3,512 + $12,880 = $35,599.
Note: Note Payable, due in two years is not a current liability but a long term liability since it is not payable within one year.
Substituting the values into equation (1) we have:
Current ratio = $185,988 / $35,599 = 5.22
The current ratio of 5.22 indicates that the company more than enough current assets, 5.22 times, to pay of its current liabilities.
The answer is 22
because its so mad
i think its right
a. The journal entries are presented below:
1. Account receivable A/c Dr $3,700,000
To Sales revenue $3,700,000
(Being the goods are sold on credit)
2. Sales return and allowance A/c Dr $50,000
To Accounts receivable $50,000
(Being sales return is recorded)
3. Cash A/c Dr $2,810,000
To Accounts receivable $2,810,000
(Being cash is received)
4. Allowance for Doubtful Accounts A/c Dr $90,000
To Account receivable A/c $90,000
(Being written off amount is recorded)
5. Accounts Receivable Dr A/c Dr $29,000
To Allowance for Doubtful Accounts A/c $29,000
(Being uncollected amount is recorded)
Cash A/c Dr $29,000
To Accounts Receivable A/c Dr $29,000
(Being recovery of bad debt is recorded)
b. The T-Accounts are shown below:
Opening balance $960,000 Sales returns $50,000
Sales $3,700,000 Collection $28,10,000
Uncollectible $29,000 Written off $90,000
Ending balance $17,10,0000
Allowance for Doubtful Debts
Written off $90,000 Beginning balance $80,000
Ending balance $19,000
c. Bad debt expense A/c Dr $96,000 ($115,000 - $19,000)
To Allowance for doubtful debts $96,000
(Being bad debt expense is recorded)
d. The computation of the accounts receivable turnover ratio is given below:
Account receivable turnover ratio = Net credit sales ÷ Average accounts receivable
Net credit sales is $960,000 $3,700,000
And, the Average accounts receivable would be
= (Accounts receivable, beginning of year + Accounts receivable, end of year) ÷ 2
= ( $880,000 + $1,595,000) ÷ 2
The Accounts receivable, beginning of year would be
= $960,000 - $80,000
The Accounts receivable, ending of year would be
= $1,710,000 - $115000
So, the accounts receivable turnover ratio would be
= $3,700,000 ÷ $1,237,500
= 2.99 times
I woulnt kno
a) Journal Entries to record each transaction:
1. Debit Accounts Receivable $2,600,000
Credit Sales Revenue $2,600,000
To record the sale of goods on account.
2. Debit Sales Returns $45,000
Credit Accounts Receivable $45,000
To record the return of goods on account.
3. Debit Cash Account $2,250,000
Credit Accounts Receivable $2,250,000
To record collections from customers.
4. Debit Uncollectible Expenses $10,000
Credit Accounts Receivable $10,000
To record the write-off of accounts deemed uncollectible.
5. Debit Cash Account $3,000
Credit Uncollectible Expenses $3,000
To record the recovery of bad debts previously written off.
Accounts Titles Debit Credit
Beginning balances $250,000
Sales Revenue 2,600,000
Sales Returns 45,000
Cash Account 2,250,000
Uncollectible Expenses 10,000
Ending Balances 545,000
Total $2,850,000 $2,850,000
Allowance for doubtful accounts
Accounts Titles Debit Credit
Beginning balances $15,000
Uncollectible expense 7,000
Ending balances $22,000
c) Journal Entry
Debit Uncollectible Expense $7,000
Credit Allowance for doubtful accounts $7,000
To record the allowance for uncollectibles.
a) Data and Calculations:
Accounts receivable $250,000
Less: Allowance for doubtful accounts 15,000
b) The allowance for Doubtful Accounts will increase by $7,000 to $22,000. As a result, the Uncollectible Expense will be debited with $7,000 while the Allowance for doubtful accounts will be credited with $7,000. This brings the total of Allowance for Doubtful Accounts to $22,000 in accordance with the new estimate based on the aging of accounts receivable.
the first successful, urban blues recording, selling more than 75,000 copies, was made in year 1920.
mamie smith recorded the first commercially successful example of the urban blues, with the recording of “crazy blues”."crazy blues" was recorded on august 10, 1920, in new york city. within a month of the release of “crazy blues” it had sold 75,000 copies.