Aging Accounts Receivable - On September 30, 2007 (the end of its fiscal year), the Lufkin Corporation reported accounts receivable of $331,750 and an allowance for doubtful accounts of $16,700. During fiscal 2008 the following transactions occurred:
|
Credit sales (terms, n/EOM)
|
$2,017,800
|
|
Collections on accounts receivable
|
1,956,000
|
|
Accounts receivable written off
|
16,200
|
On September 30, 2008 an aging of the accounts receivable balance indicated the following:
|
Age
|
Amount
|
Estimated Percentage Uncollectible
|
|
Under 30 days
|
$169,250
|
0.80%
|
|
30-90 days
|
100,000
|
1.6
|
|
91-180 days
|
55,900
|
5
|
|
181-360 days
|
38,200
|
15
|
|
Over 360 days
|
14,000
|
40
|
|
$377,350
|
Required
1. Prepare the journal entries necessary to record the credit sales, collections on account, write-off of accounts receivable, and the bad debts expense for Lufkin for fiscal 2008.
2. What are Lufkin's September 30, 2008 balances in Accounts Receivable and in its Allowance for Doubtful Accounts and how will they be disclosed on the September 30, 2008 balance sheet?
3. Compute Lufkin's receivables turnover in days, assuming a 360-day business year. What is your evaluation of its collection policies?