At December 31, 2019, Sheridan Co. reported the following information on its balance sheet. Accounts receivable $956,500 Less: Allowance for doubtful accounts 80,900 During 2020, the company had the following transactions related to receivables. 1. Sales on account $3,693,300 2. Sales returns and allowances 49,200 3. Collections of accounts receivable 2,806,300 4. Write-offs of accounts receivable deemed uncollectible 91,000 5. Recovery of bad debts previously written off as uncollectible 27,650 Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable. Enter the January 1, 2020, balances in Accounts Receivable and Allowance for Doubtful Accounts, post the entries to the two accounts (use T-accounts), and determine the balances. Prepare the journal entry to record bad debt expense for 2020, assuming that an aging of accounts receivable indicates that expected bad debts are $115,000. Compute the accounts receivable turnover for 2020 assuming the expected bad debt information provided in (c).
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.
At December 31, 2019, Sheridan Co. reported the following information on its balance sheet.
| $956,500 | ||
| Less: Allowance for doubtful accounts | 80,900 |
During 2020, the company had the following transactions related to receivables.
| 1. | Sales on account | $3,693,300 | ||
| 2. | Sales returns and allowances | 49,200 | ||
| 3. | Collections of accounts receivable | 2,806,300 | ||
| 4. | Write-offs of accounts receivable deemed uncollectible | 91,000 | ||
| 5. | Recovery of |
27,650 |
Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable.
Enter the January 1, 2020, balances in Accounts Receivable and Allowance for Doubtful Accounts,
Prepare the
Compute the accounts receivable turnover for 2020 assuming the expected bad debt information provided in (c).
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
