Net credit sales for the month are $800,000. The accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the
receivables balance using the percentage of receivables basis. If the Allowance for Doubtful Accounts has a credit balance of $5,000 before
adjustment, what is the balance after adjustment?
Notes: Don’t increase allowance for doubtful debts just add the amount needed to equal what
expected losses are. If it’s at 5,000 and you calculate 12,000 dollars off losses add 7,000 to get
12,000 not 12,000 to get 17,000.
In 2010 Patterson Wholesale Company had net credit sales of $750,000. On January 1, 2010, Allowance for Doubtful Accounts had a credit
balance of $18,000. During 2010, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance
should be 10% of the balance in receivables (percentage of receivables basis). If the accounts receivable balance at December 31 was
$200,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2010?
Notes: Add the written off accounts to the difference of the balance of doubtful accounts and
estimated doubtful accounts. (30,000 + 20,000 – 18,000)= 32,000.
Prall Corporation sells its goods on terms of 2/10, n/30. It has a receivables turnover ratio of 7. What is its average collection period (days)?
Notes: terms of selling doesn’t matter. 365/ receivables turnover ratio.
Good Stuff Retailers accepted $50,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit