In its first year of operations, AJS Company had sales of $4 million (all on credit) and

Question:

In its first year of operations, AJS Company had sales of $4 million (all on credit) and cost of goods sold of $1,750,000. Sales allowances of $100,000 were given on substandard merchandise. During the year, the company collected $3.2 million cash on account. At year end, December 31, 2014, the credit manager estimates that 4% of the will become uncollectible.
At December 31, 2014, the balances in selected other accounts were:
Accounts payable .................................... $350,000
Cash ...................................................... 40,000
Interest receivable ...................................... 1,125
Interest revenue ......................................... 2,250
Merchandise inventory ................................ 325,000
Notes receivable, due April 10, 2017 ............... 45,000
Prepaid insurance ...................................... 8,000
Short-term investments ............................... 50,000
Unearned sales revenue .............................. 25,000
Instructions
(a) Prepare the journal entry to record the bad debt expense.
(b) Prepare the current assets section of the for AJS Company at December 31, 2014.
(c) Calculate the receivables turnover and collection period. (Remember that this is the end of the first year of business.)
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... 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...