Question

Evaluate the following scenarios, assuming both companies use the net credit sales as the basis for estimating bad debts expense:
a. At year end, Dash Company has accounts receivable of $184,000. The allowance for uncollectible accounts has a balance prior to adjustment of $(300). Net credit sales for the year were $450,000 and 2.5% is estimated to be uncollectible.
b. At year end, Bridges Company has accounts receivable of $53,000. The allowance for uncollectible accounts has a negative balance prior to adjustment of $400. In other words, the firm wrote off more accounts than it had estimated. Net credit sales for the year were $250,000 and 2% is estimated to be uncollectible.

Requirements
For each preceding 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 Dash Company had an accounts receivable (net) balance of $176,000 at the beginning of the year, what is Dash’s accounts receivable turnover ratio for the year?
5. Assuming Bridges Company had an accounts receivable (net) balance of $85,000 at the beginning of the year, what is Bridges’ accounts receivable turnover ratio for the year?



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  • CreatedSeptember 01, 2014
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