At December 31, 2009, Kelso Imports reported this information on its balance sheet. Accounts receivable $600,000 Less:

Question:

At December 31, 2009, Kelso Imports reported this information on its balance sheet.

Accounts receivable $600,000

Less: Allowance for doubtful accounts 40,000

During 2010 the company had the following transactions related to receivables.

1. Sales on account ......................................................................... $2,500,000

2. Sales returns and allowances ........................................................... 40,000

3. Collections of accounts receivable .............................................. 2,200,000

4. Write-offs of accounts receivable deemed uncollectible ............... 45,000

5. Recovery of bad debts previously written off as uncollectible ...... 15,000

Instructions

(a) Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable.

(b) Enter the January 1, 2010, balances in Accounts Receivable and Allowance for Doubtful Accounts, post the entries to the two accounts (use T accounts), and determine the balances.

(c) Prepare the journal entry to record bad debts expense for 2010, assuming that aging the accounts receivable indicates that estimated bad debts are $46,000.

(d) Compute the receivables turnover ratio and average collection period.

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...