Question-1: At December 31, 2013, Globe Trotter Imports reported the following information on its statement of financial position. Accounts receivable Tk.220,000 Less: Allowance for doubtful accounts 15,000 During 2014, the company had the following transactions related to receivables. 1. Sales on account Tk.2,400,000 2. Sales returns and allowances 45,000 3. Collections of accounts receivable 2,250,000 4. Write-offs of accounts receivable deemed uncollectible 13,000 5. Recovery of bad debts previously written off as uncollectible 2,000. Instructions (a) Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable. (b) Enter the January 1, 2014, balances in Accounts Receivable and Allowance for Doubtful Accounts. Post the entries to the two accounts (use T-accounts), and determine the balances. (c) Prepare the journal entry to record bad debt expense for 2014, assuming that an aging of accounts receivable indicates that estimated bad debts are Tk.22,000. (d) Compute the accounts receivable turnover ratio for the year 2014, assuming the expected bad debt information presented 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.
Question-1: At December 31, 2013, Globe Trotter Imports reported the following information
on its
Less: Allowance for doubtful accounts 15,000
During 2014, the company had the following transactions related to receivables.
1. Sales on account Tk.2,400,000
2. Sales returns and allowances 45,000
3. Collections of accounts receivable 2,250,000
4. Write-offs of accounts receivable deemed uncollectible 13,000
5. Recovery of
Instructions
(a) Prepare the journal entries to record each of these five transactions. Assume that no
cash discounts were taken on the collections of accounts receivable.
(b) Enter the January 1, 2014, balances in Accounts Receivable and Allowance for Doubtful
Accounts.
balances.
(c) Prepare the
of accounts receivable indicates that estimated bad debts are Tk.22,000.
(d) Compute the accounts receivable turnover ratio for the year 2014, assuming the expected
bad debt information presented in (c).
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