Company ACompany BNet credit sales, Dec. 31, 2019Net accounts receivable, Dec. 31, 2018Net accounts receivable, Dec. 31, 2019Number of days' sales in receivables ratio, 2018Net income, Dec. 31, 2018$540,000$120,000$180,000103 days$250,000$620,000$145,000$175,000110 days$350,000Additional Information:• Company A: Bad debt estimation percentage using the income statement method is 6%, and the balance sheetmethod is 10%. The $230,000 in Other Expenses includes all company expenses except Bad Debt Expense.• Company B: Bad debt estimation percentage using the income statement method is 6.5%, and the balance sheetmethod is 8%. The $140,000 in Other Expenses includes all company expenses except Bad Debt Expense.B. On an Excel spreadsheet, answer the following questions below:1. Compute the number of days' sales in receivables ratio for each company for 2019 and interpret the results (roundanswer to nearest whole number) point).2. If Company A changed from the income statement method to the balance sheet method for recognizing bad debtestimation, how would that change net income in 2019? Explain (show calculations as formulas in the cells).3. If Company B changed from the balance sheet method to the income statement method for recognizing bad debtestimation, how would that change net income in 2019? Explain (show calculations as formulas in the cells).4. What benefits do each company gain by changing their method of bad debt estimation?5. Which company would you invest in and why? Provide supporting details.

Accounts receivable: Accounts receivable refers to the amount to be received within a short period…

edit sales, counts receivable, Dec. 31, 2018 counts receivable, Dec. 31, 2019 er of days' sales in receivables ratio, 2018 come, Dec. 31, 2018 $540,000 $620,000 $120,000 $180,000 103 days $250,000 $145,000 $175,000 110 days $350,000 al Information: pany A: Bad debt estimation percentage using the income statement method is 6%, and od is 10%. The $230,000 in Other Expenses includes all company expenses except Bad pany B: Bad debt estimation percentage using the income statement method is 6.5%, and od is 8%. The $140,000 in Other Expenses includes all company expenses except Bad D

edit sales, counts receivable, Dec. 31, 2018 counts receivable, Dec. 31, 2019 er of days' sales in receivables ratio, 2018 come, Dec. 31, 2018 $540,000 $620,000 $120,000 $180,000 103 days $250,000 $145,000 $175,000 110 days $350,000 al Information: pany A: Bad debt estimation percentage using the income statement method is 6%, and od is 10%. The $230,000 in Other Expenses includes all company expenses except Bad pany B: Bad debt estimation percentage using the income statement method is 6.5%, and od is 8%. The $140,000 in Other Expenses includes all company expenses except Bad D

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 13EB: Fortune Accounting reports $1,455,000 in credit sales for 2018 and $1,678,430 in 2019. It has an...

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Comprehensive Receivables Problem Blackmon Corporations December 31, 2018, balance sheet disclosed the following information relating to its receivables: The company has a recourse liability of 700 related to a note receivable sold to a bank. During 2019, credit sales (terms, n/EOM) totaled 2,200,000, and collections on accounts receivable (unassigned) amounted to 1,900,000. Uncollectible accounts totaling 18,000 from several customers were written off, and a 1,350 accounts receivable previously written off was collected. Additionally, the following transactions relating to Blackmons receivables occurred during the year: On December 31, 2019, an aging of the accounts receivable balance indicated the following: Required: 1. Prepare the journal entries to record the preceding receivable transactions during 2019 and the necessary adjusting entry on December 31, 2019. Assume a 360-day year for interest calculations and round calculations to the nearest dollar. 2. Prepare the receivables portion of Blackmons December 31, 2019, balance sheet. 3. Next Level Compute Blackmons accounts receivable turnover in days, assuming a 360-day business year. What is your evaluation of its collection policies? 4. If Blackmon uses IFRS, what might be the heading of the section for the receivables reported in Requirement 2?
Ratio Analysis The following information was taken from Nash Inc.s trial balances as of December 31, 2018, and December 31, 2019. Required: 1. Calculate the net profit margin and accounts receivable turnover for 2019. ( Note: Round answers to two decimal places.) 2. How much does Nash make on each sales dollar? 3. How many days does the average receivable take to be paid (assuming all sales are on account)?
McKinney Co. estimates its uncollectible accounts as a percentage of credit sales. McKinney made credit sales of 1,500,000 in 2019. McKinney estimates 2.5% of its sales will be uncollectible. Prepare the journal entry to record bad debt expense for McKinney at the end of 2019.
Inferring Accounts Receivable Amounts At the end of 2019, Karras Inc. had a debit balance of 141,120 in its accounts receivable. Additionally, Karras had a credit balance in its allowance for doubtful accounts of 4,350 and 9,420 at the beginning and end of the year, respectively. During the year, Karras made credit sales of 1,530,000, collected receivables in the amount of 1,445,700, and recorded bad debt expense of 83, 750. Required: Next Level Compute the amount of accounts receivable that Karras wrote off during the year and the amount of accounts receivable at the beginning of the year.
Write-Off of Uncollectible Accounts King Enterprises had 27 customers utilizing its financial planning services in 2019. Each customer paid King $25,000 for receiving Kings assistance. King estimates that 2% of its $675,000 credit sales in 2019 will be uncollectible. During 2020, King wrote off $2,700 related to services performed in 2019. Required: 1. Prepare the journal entry to record the defaulted balance. 2. Prepare the adjusting entry to record the bad debt expense for 2019.
Fortune Accounting reports $1,455,000 in credit sales for 2018 and $1,678,430 in 2019. It has an $825,000 accounts receivable balance at the end of 2018 and $756,000 at the end of 2019. Fortune uses the balance sheet method to record bad debt estimation at 7.5% during 2018. To manage earnings more favorably, Fortune changes bad debt estimation to the income statement method at 5.5% during 2019. A. Determine the bad debt estimation for 2018. B. Determine the bad debt estimation for 2019. C. Describe a benefit to Fortune in 2019 as a result of its earnings management.
Cash Receipts from Customers Singleton Inc. had accounts receivable of $22,150 at January 1, 2019, and $26,850 at December 31, 2019. Net income for 2019 was $125,300 and sales revenue was $1,240,000. Required: Compute the amount of cash collected from customers using the direct method.
Starlight Enterprises has net credit sales for 2019 in the amount of $2,600,325, beginning accounts receivable balance of $844,260, and an ending accounts receivable balance of $604,930. Compute the accounts receivable turnover ratio and the number of days sales in receivables ratio for 2019 (round answers to two decimal places). What do the outcomes tell a potential investor about Starlight Enterprises if the industry average is 1.5 times and the number of days sales ratio is 175 days?
Estimating Bad Debts from Receivables Balances The following information is extracted from Shelton Corporations accounting records at the beginning of 2019: During 2019, sales on credit amounted to 575,000, 557,400 was collected on outstanding receivables and 2,600 of receivables were written off as uncollectible. On December 31, 2019, Shell on estimastes its bad debts to be 4% of the outstanding gross accounts receivable balance. Required: 1. Prepare the journal entry necessary to record Sheltons estimate of bad debt expense for 2019. 2. Prepare the Accounts Receivable section of Shelton's December 31, 2019, balance sheet. 3. Compute Shelton's receivables turnover. (Round to one decimal place.) 4. It Sheldon uses IFRS, what might be the heading for the accounts receivable section in Requirement 2?
South Rims has an accounts receivable balance at the end of 2018 of $357,470. The net credit sales for the year are $769,346. The balance at the end of 2017 was $325,300. What is the accounts receivable turnover rate for 2018 (rounded to two decimal places)? A. 2.02 times B. 2.25 times C. 2.15 times D. 1.13 times
Michelle Company reports $345,000 in credit sales and $267,500 in accounts receivable at the end of 2019. Michelle currently uses the income statement method to record bad debt estimation at 4%. To manage earnings more efficiently, Michelle changes bed debt estimation to the balance sheet method at 4%. How much is the difference in net income between the income statement and balance sheet methods? A. $3,100 B. $13,800 C. $10,700 D. $77,500
Berry Farms has an accounts receivable balance at the end of 2018 of $425,650. The net credit sales for the year are $924,123. The balance at the end of 2017 was $378,550. What is the number of days sales in receivables ratio for 2018 (round all answers to two decimal places)?