Mgmt_200_Spring_2008_solutions_2-20-08(2,20)

Mgmt_200_Spring_2008_solutions_2-20-08(2,20) - Accounts...

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Management 200 – Introductory Financial Accounting– Spring 2008 Krannert School of Management - Purdue University Solutions to class assignment for February 20, 2008 E6–13. 1. December 31, 2008-Adjusting entry: Bad debt expense (+E, –SE). ................................................. 3,650 Allowance for doubtful accounts (+XA, –A). ........... 3,650 To adjust for estimated bad debt expense for 2008 computed as follows: Aged accounts receivable Estimated percentage uncollectible Estimated amount uncollectible Not yet due $65,000 x 1% = $ 650 Up to 180 days past due 10,000 x 15% = 1,500 Over 180 days past due 4,000 x 40% = 1,600 Estimated balance in Allowance for Doubtful Accounts 3,750 Current balance in Allowance for Doubtful Accounts 100 Bad Debt Expense for the year $3,650 2. Balance sheet:
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Unformatted text preview: Accounts receivable ($65,000 + $10,000 + $4,000). ....... $79,000 Less allowance for doubtful accounts. ............................. 3,750 Accounts receivable, net of allowance for doubtful accounts. ................................................ $75,250 E619. 1 Receivables turnover = Net Sales = $24,710,000 = 8.74 times Average Net Trade Accounts Receivable $2,827,000* Average days sales = 365 = 365 = 41.8 days in receivables Receivables Turnover 8.74 * ($3,027,000 + $2,627,000) 2 2. The receivables turnover ratio reflects how many times average trade receivables were recorded and collected during the period. The average days sales in receivables indicates the average time it takes a customer to pay its account....
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