DOUBTFUL ACCOUNTS 9. Rainbow Company uses the balance sheet approach to estimate

Question

DOUBTFUL ACCOUNTS 9. Rainbow Company uses the balance sheet approach to estimate bad debts. By aging the customers' accounts, it was estimated that $7,325 of the company's month-end accounts receivable would prove to be uncollectible. What is the adjusting entry December 31, 2014 if the Allowance for Bad Debts has a credit balance of $635? 10. Love it at Levitt, see it at Seaman, but find it at Fine Furniture Company that provided the following information: 2013 2012 2011 Net Sales $1,080,000 $860,000 $750,000 Accounts Receivable (12/31) 81,900 80,100 76,800 What is Fine Furniture Co. turnover rate and average days uncollected for 2012 & 2013? Compare the two and give a possible explanation for any change.

Explanation / Answer

Already have a $635 credit balance in that account. So you only need to credit another
7,325 - 635 = $6,690.
So your entry would be
DR Bad debt expense 6,690
CR Allowance for Doubtful Accounts 6,690

Receivable Turnover Ratio: Net Sales/Turnover

For 2012 = 80,100/860,000 = 0.09 Times

For 2013 = 81,900/10,80,000 = 0.08 Times

So Collection in 2013 is better than 2012 as Ratio was lower

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