During its first year of operations, Morales Company had credit sales of $3,000,000, of which $600,000 remained

Question:

During its first year of operations, Morales Company had credit sales of $3,000,000, of which $600,000 remained uncollected at year-end. The credit manager estimates that $18,000 of these receivables will become uncollectible.

(a) Prepare the journal entry to record the estimated un-collectibles.

(b) Prepare the current assets section of the balance sheet for Morales Company, assuming that in addition to the receivables it has cash of $90,000, merchandise inventory of $180,000, and prepaid expenses of $13,000.

(c) Calculate the receivables turnover ratio and average collection period. Assume that average net receivables were $300,000. Explain what these measures tell us.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...