Estimating Bad Debts from Receivables Balances The following information is extr

Question

Estimating Bad Debts from Receivables Balances The following information is extracted from Shelton Corporation's accounting records at the beginning of 2013: Accounts Receivable $75,000 Allowance for Doubtful Accounts 1,100 (credit) During 2013, sales on credit amounted to $598,000, $553,600 was collected on outstanding receivables and $2,100 of receivables were written off as uncollectible. On December 31, 2013, Shelton estimates its bad debts to be 3% of the outstanding gross accounts receivable balance. Required: Hide 1. Prepare the journal entry necessary to record Shelton's estimate of bad debt expense for 2013. . Prepare the Accounts Receivable section of Shelton's December 31, 2013 balance sheet. . Compute Shelton's receivables turnover. If required, round your answer to one decimal place. 4. If Shelton Company uses IFRS, what might be the heading for the accounts receivable section in Requirement 2? The input in the box below will not be graded, but may be reviewed and considered by your instructor.

Explanation / Answer

The Accounts Receivable section of Shelton's December 31, 2013 balance sheet :

Opening Balance = $75000

Add: Credit Sales = $598000

Total Credit Balance = $673000

Less: Cash collected = -$553600

Less: Bad Debts written off = -$ 2100

Closing Balance of Account Receivable = $117300

Bad Debts provision = $117300 * 3% = $3519

Journal Entry:

Debit Bad Debts $3519

Credit   Allowance for Doubtful Accounts $3519

Shelton's receivables turnover = 598000 / 117300 = 5.10 times

If Shelton Company uses IFRS, the heading for the accounts receivable section will be termed as Current Assets Section.

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