Clean Sweep Ltd. manufactures several different brands of vacuum cleaners, from hand-held models to built-in central vacuums. It sells its products to distributors on credit, giving customers 30 days to pay. During the year ending June 30, 2020, Clean Sweep recorded sales of $1,550,000. At June 30, the company prepared the following aging schedule:

The Allowance for Doubtful Accounts had a credit balance of $19,000 before the year-end adjustment was made.

Required

a. Prepare the adjusting entry to bring 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?

Transcribed Image Text:

Estimated Percentage Uncollectible Receivable Amount $150,000 50,000 75,000 100,000 Number of Days Outstanding Less than 31 31 to 45 46 to 90 More than 90 4% 7% 7% 10% 25%