ch 8 - Chapter 8 Suggested Practice Problems BRIEF EXERCISE...

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Unformatted text preview: Chapter 8 Suggested Practice Problems BRIEF EXERCISE 8-3 (a) Allowance for Doubtful Accounts............................ 3,000 Accounts Receivable........................................ 3,000 (b) (1) Before Write-Off (2) After Write-Off Accounts receivable $700,000 $697,000 Allowance for doubtful accounts 28,000 25,000 Cash realizable value $672,000 $672,000 BRIEF EXERCISE 8-8 (a) Bad Debts Expense................................................... 24,000 Allowance for Doubtful Accounts.................... 24,000 (b) Current assets Cash..................................................................... $ 90,000 Accounts receivable.......................................... $600,000 Less: Allowance for doubtful accounts.......... 24,000 576,000 Merchandise inventory...................................... 180,000 Prepaid expenses............................................... 13,000 $859,000 (c) Receivables turnover ratio = $3,000,000 $300,000 = 10 times Average collection period = 365 days 10 = 36.5 days The receivables turnover ratio is a liquidity measure. The average col- lection period indicates the effectiveness of a companys credit and collection policies. To evaluate Salizars liquidity and credit policies, these measures should be compared to the same measures for com- petitors or Salizars prior years....
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ch 8 - Chapter 8 Suggested Practice Problems BRIEF EXERCISE...

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