At December 31, 2013, Dustin Company reported this information on its balance sh

Question

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 1. 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.) 2. 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. 3. 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. 4. compute the accounts receivable turnover and average collection period.

Explanation / Answer

1 J.E a Debtor A/c Dr $3600000 To Sales $3600000 (being Sales Made) b Sales Return A/c Dr $150000 To Receivables $150000 (Being Sales Return Made) c Bank A/c Dr. $3100000 To Debtors $3100000 (Being Amt received) d Allowance for doubtful debt A/c Dr. $78000 Bad Debt A/c $14000. To debtors $92000 (Being Amt written off as bad debt) e Bank A/c Dr $28000 To Bad Debt $28000 (Being Bad debt recovered) 2 Balance of A/R As on 31.12 $960000 Add: Credit sales made $3600000 Less: Amt received $3100000 Less: Bad debt $92000 Baance on 01.04 $1368000

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