Answer:
Explanation:
a. The journal entries are presented below:
1. Account receivable A/c Dr $3,700,000
To Sales revenue $3,700,000
(Being the goods are sold on credit)
2. Sales return and allowance A/c Dr $50,000
To Accounts receivable $50,000
(Being sales return is recorded)
3. Cash A/c Dr $2,810,000
To Accounts receivable $2,810,000
(Being cash is received)
4. Allowance for Doubtful Accounts A/c Dr $90,000
To Account receivable A/c $90,000
(Being written off amount is recorded)
5. Accounts Receivable Dr A/c Dr $29,000
To Allowance for Doubtful Accounts A/c $29,000
(Being uncollected amount is recorded)
Cash A/c Dr $29,000
To Accounts Receivable A/c Dr $29,000
(Being recovery of bad debt is recorded)
b. The T-Accounts are shown below:
Account receivable
Opening balance $960,000 Sales returns $50,000
Sales $3,700,000 Collection $28,10,000
Uncollectible $29,000 Written off $90,000
Collection $29,000
Ending balance $17,10,0000
Allowance for Doubtful Debts
Written off $90,000 Beginning balance $80,000
UnCollectible $29,00
Ending balance $19,000
c. Bad debt expense A/c Dr $96,000 ($115,000 - $19,000)
To Allowance for doubtful debts $96,000
(Being bad debt expense is recorded)
d. The computation of the accounts receivable turnover ratio is given below:
Account receivable turnover ratio = Net credit sales ÷ Average accounts receivable
where,
Net credit sales is $960,000 $3,700,000
And, the Average accounts receivable would be
= (Accounts receivable, beginning of year + Accounts receivable, end of year) ÷ 2
= ( $880,000 + $1,595,000) ÷ 2
= $1,237,500
The Accounts receivable, beginning of year would be
= $960,000 - $80,000
= $880,000
The Accounts receivable, ending of year would be
= $1,710,000 - $115000
= $1,595,000
So, the accounts receivable turnover ratio would be
= $3,700,000 ÷ $1,237,500
= 2.99 times
