Analyze the effects of accounts receivable transactions using the percentage of sales method
Evaluate the following scenarios, assuming both companies use the net credit sales as the basis for estimating bad debts expense:
a. At year end, Bonnie Company has accounts receivable of $112,000. The allowance for uncollectible accounts has a balance prior to adjustments of $(400). In other words, there were fewer specific write-offs than estimated., leaving an excess in the allowance account. Net credit sales for the year were $315,000 and 3% is estimated to be uncollectible.
b. At year end, Clyde Company has acounts receivable of $220,000. The allowance for uncollectible accounts has a balance prior to adjustment of $200. In other words, more specific accounts were written off than estimated, so the allowance was short by $200. Net credit sales for the year were $1,525,000 and 1% is estimated to be uncollectible.
for each situation compute the following:
1. the bad debts expense for the year
2. the balance in the allowance for uncollectible accounts account at year end
3. the net realizable value of accounts receivable at year end
4. assuming Bonnie company had an accounts receivable (net) balance of $105,000 at the beginning of the year, what is Bonnie accounts receivable turnover ratio for the year
5. Assuming Clyde Company had an accounts receivable (net) balance of $226,000 at the beginning of the year, what is Clyde's accounts receivable turnover ratio for the year?
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