At December 31, 2013, Weiss Imports reported this information on its balance she

Question

At December 31, 2013, Weiss Imports reported this information on its balance sheet. During 2014, the company had the following transactions related to receivables. Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable. Enter the January 1, 2014, balances in Accounts Receivable and Allowance for Doubtful Accounts, post the entries to the two accounts and determine the balances. Prepare the journal entry to record bad debt expense for 2014, assuming that aging the accounts receivable indicates that estimated bad debts are $88,000. Compute the accounts receivable turnover. Compute the average collection period.

Explanation / Answer

Account Title Dr CR Accounts Receivable 2970000 Sales 2970000 Sales return and Allowance 72200 Accounts Receivable 72200 Cash. 2700000 Accounts Receivable 2700000 Allowance for Doubtful Accounts 40700 Accounts Receivable 40700 Accounts Receivable 16900 Allowance for Doubtful Accounts 16900 Cash 16900 Accounts Receivable 16900 Prepare the journal entry to record bad debts expense for 2012, assuming that aging the accounts receivable indicates that estimated bad debts are $88000. DR CR Bad Debt Expense(88000-27200) 60800 Allowance for Doubtful Accounts 60800 Receivables turnover ratio. Net Credit Sales / Avg Net Accounts Recevable 2897800/708050 =4.09 times Credit Sales =(2970000-72200)=2897800 Avg Net Accounts Recevable =(699000 - 51000) + (856100 - 88000)] / 2 =708050 Compute the average collection period. Average collection period = 365 days / Receivables turnover ratio 365 days / 4.09 = 89.24 days

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