KatieEighties
Mar 16, 2007, 09:18 PM
At December 31, 2005, Zurich Company reported this info on its balance sheet.
Accounts receivable $960,000
Less: Allowance for doubtful accounts $70,000
During 2006 the company had the following transactions related to receivables.
1. Sales on account $3,800,000
2. Sales returns and allowances $50,000
3. Collections of accounts receivable $3,000,000
4. Write-offs of accounts receivable deemed uncollectible $90,000
5. Recovery of bad debts previously written off as uncollectible $40,000
Instructions:
1-Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable.
2-Enter the January 1, 2006, balances in Accounts Receivable and Allowance for Doubtful Accounts, post the entries to the two accounts (use T accounts), and determine the balances.
3-Prepare the journal entry to record bad debts expense for 2006, assuming that aging the accounts receivable indicates that expected bad debts are $110,000.
4-Compute the receivables turnover ratio and average collection period.
This is what I have come up with so far:
Journal
Sales 3,800,000
Accounts Receivable 3,800,000
Sales Returns and Allowances 50,000
Accounts receivable 50,000
Cash 3,000,000
Accounts Receivable 3,000,000
Allowance for Doubtful Accounts 90,000
Accounts receivable 90,000
Accounts Receivable 40,000
Allowance for Doubtful Accounts 40,000
Cash 40,000
Accounts Receivable 40,000
Accounts Receivable
Dec. 31 960,000 Dec. 31 70,000
Jan. 1 890,000
Allowance for Doubtful Accounts
Dec. 31 70,000 Dec. 31 70,000
Jan. 1 0
Journal
Bad Debt Expense 110,000
Accounts receivable 110,000
Receivables Turnover Ratio=4.4
Average Collection Period=83 Days
So I basically need someone to tell me if I am on the right track at all and if I'm not then could someone help me get on the right track? Thank you for any help you can give me.
Accounts receivable $960,000
Less: Allowance for doubtful accounts $70,000
During 2006 the company had the following transactions related to receivables.
1. Sales on account $3,800,000
2. Sales returns and allowances $50,000
3. Collections of accounts receivable $3,000,000
4. Write-offs of accounts receivable deemed uncollectible $90,000
5. Recovery of bad debts previously written off as uncollectible $40,000
Instructions:
1-Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable.
2-Enter the January 1, 2006, balances in Accounts Receivable and Allowance for Doubtful Accounts, post the entries to the two accounts (use T accounts), and determine the balances.
3-Prepare the journal entry to record bad debts expense for 2006, assuming that aging the accounts receivable indicates that expected bad debts are $110,000.
4-Compute the receivables turnover ratio and average collection period.
This is what I have come up with so far:
Journal
Sales 3,800,000
Accounts Receivable 3,800,000
Sales Returns and Allowances 50,000
Accounts receivable 50,000
Cash 3,000,000
Accounts Receivable 3,000,000
Allowance for Doubtful Accounts 90,000
Accounts receivable 90,000
Accounts Receivable 40,000
Allowance for Doubtful Accounts 40,000
Cash 40,000
Accounts Receivable 40,000
Accounts Receivable
Dec. 31 960,000 Dec. 31 70,000
Jan. 1 890,000
Allowance for Doubtful Accounts
Dec. 31 70,000 Dec. 31 70,000
Jan. 1 0
Journal
Bad Debt Expense 110,000
Accounts receivable 110,000
Receivables Turnover Ratio=4.4
Average Collection Period=83 Days
So I basically need someone to tell me if I am on the right track at all and if I'm not then could someone help me get on the right track? Thank you for any help you can give me.