Problem:
At December 31, 2007, Curtis Imports reported this information on its balance sheet
Accounts receivable $600,000
Less: Allowance for doubtful accounts $40,000
During 2008, the company had the following transactions related to receivables.
1) Sales on the account $2,600,000
2) sales returns and allowances $40,000
3) Collections of accounts receivable $2,200,000
4) Write-offs of accounts receivable deemed uncollectible $45,000
5) Recovery of bad debts previously written off as uncoll. $18,000.
A) Prepare journal entries to record each of these five transactions . Assume that no cash discounts were taken on the collections of accounts receivables.
B) Enter January 1 2008 balances in Accounts Receivable and allowance for doubtful accounts, post the entries (use T accounts) and determine the balances.
C) Prepare the journal entry to record bad debts expense for 2008, assuming that aging the accounts receivables indicates that estimated bad debts are $46,000.
D) Compute the receivables turnover ratio and average collection period.