(Analysis of Receivables) Presented below is information for Jones Company.1. Beginning-of-the-year Accounts Receivable balance was $15,000.2. Net sales (all on account) for the year were $100,000. Jones does not offer cash discounts.3. Collections on accounts receivable during the year were $70,000.Instructions(a) Prepare (summary) journal entries to record the items noted above.(b) Compute Jones’s accounts receivable turnover and days to collect receivables for the year. The company does not believe it will have any bad debts.(c) Use the turnover ratio computed in (b) to analyze Jones’s liquidity. The turnover ratio last year was 6.0.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
(Analysis of Receivables) Presented below is information for Jones Company.
1. Beginning-of-the-year
2. Net sales (all on account) for the year were $100,000. Jones does not offer cash discounts.
3. Collections on accounts receivable during the year were $70,000.
Instructions
(a) Prepare (summary)
(b) Compute Jones’s accounts receivable turnover and days to collect receivables for the year. The company does not believe it will have any
(c) Use the turnover ratio computed in (b) to analyze Jones’s liquidity. The turnover ratio last year was 6.0.
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