Brief Exercise 8-10 During its first year of operations, Pronghorn Corp had cred

Question

Brief Exercise 8-10

During its first year of operations, Pronghorn Corp had credit sales of $2,714,100, of which $429,000 remained uncollected at year-end. The credit manager estimates that $16,370 of these receivables will become uncollectible.

Account Titles and Explanation

Debit

Credit

SHOW LIST OF ACCOUNTS

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SHOW LIST OF ACCOUNTS

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LINK TO TEXT

Brief Exercise 8-10

During its first year of operations, Pronghorn Corp had credit sales of $2,714,100, of which $429,000 remained uncollected at year-end. The credit manager estimates that $16,370 of these receivables will become uncollectible.

Explanation / Answer

Answer

A.

The journal entry to record the estimated uncollectibles:

Dr Bad Debt Expense                                               $16,370
                     Cr Allowance for Doubtful Accounts                    $16,370

B.

The current assets section of the balance sheet for Pronghorn Corp.:

C.

The accounts receivable turnover Ratio = Credit sales / Average net accounts receivable

= $2714100 / $322800 = 8.41

= 8 times

Particulars Amount Amount Current Assets Cash $58320 Accounts receivable $429000 Less: Allowance for doubtful accounts ($16370) $412630 Merchandise Inventory $163960 supplies $13290 Total current assets $648200

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