Clean Sweep Ltd. manufactures several different brands of vacuum cleaners from hand-held models to built-in central vacuums.

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Clean Sweep Ltd. manufactures several different brands of vacuum cleaners from hand-held models to built-in central vacuums. It sells its products to distributers on credit, giving customers 30 days to pay. During the year ending June 30, 2011, Clean Sweep recorded sales of $550,000. At June 30, the company prepared the following aging schedule:
Clean Sweep Ltd. manufactures several different brands of vacuum cleaners

The allowance for doubtful accounts had a balance of $19,000 before the year-end adjustment was made.
Required:
a. Prepare the adjusting entry to bring the allowance for doubtful accounts to the desired level.
b. Clean Sweep's sales manager thinks the company would increase sales if it extended its normal collection cycle to 60 days from its current 30 days. Should the president accept or reject this recommendation? Why? What factors should be considered in making this decision?
c. What suggestions would you make regarding Clean Sweep's management of its accounts receivable?

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Related Book For  book-img-for-question

Financial Accounting A User Perspective

ISBN: 978-0470676608

6th Canadian Edition

Authors: Robert E Hoskin, Maureen R Fizzell, Donald C Cherry

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