Question

The following information is extracted from Shelton Corporation’s accounting records at the beginning of 2016:

Accounts Receivable	$64,000
Allowance for Doubtful Accounts	1,100	(credit)

During 2016, sales on credit amounted to $568,000, $559,000 was collected on outstanding receivables and $2,500 of receivables were written off as uncollectible. On December 31, 2016, Shelton estimates its bad debts to be 4% of the outstanding gross accounts receivable balance.

	Required:
1.	Prepare the journal entry necessary to record Shelton’s estimate of bad debt expense for 2016.
2.	Prepare the Accounts Receivable section of Shelton’s December 31, 2016, balance sheet.
3.	Compute Shelton’s receivables turnover. (Round to one decimal place.)
4.	If Sheldon uses IFRS, what might be the heading for the accounts receivable section in Requirement 2?

Prepare the journal entry necessary to record Shelton’s estimate of bad debt expense on December 31.

PAGE 9

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2

Balance Sheet

Prepare the Accounts Receivable section of Shelton’s December 31, 2016, balance sheet.

Shelton Corporation

Partial Balance Sheet

December 31, 2016

1	Accounts Receivable
2	Allowance for Doubtful Accounts
3	Net Accounts Receivable

Analysis

Compute Shelton’s receivables turnover. (Round to one decimal place.)

Shelton’s receivable turnover is ______.

Answer 1

1.)	Date	Account Titles	Debit $	Credit $
	December 31,2016	Bad Debt Expense	4,220
		Allowance for Doubtful accounts		4,220

	Working:
		Amount in $
	AR opening 2016	64,000
	Add: Sales	568,000
	Less: Collection	559,000
	Less: Written off	2,500
	Ending 2016	70,500
	Allowance should be	2,820	( 70,500 x 4% )
	Allowance balance available	1,400	(1,100 - 2,500 )
	( Debit balance now )
	Bad debt expense	4,220	( 2,820 + 1,400 )

2.)	Shelton Corporation
	Partial Balance Sheet
	December 31, 2016		Amount in $
	1	Accounts Receivable	70,500
	2	Less :Allowance for Doubtful Accounts	2,820
	3	Net Accounts Receivable	67,680

3.)	Opening accounts receivable,net	$ 62,900	(64,000 - 1,100 )
	Closing Accounts receivable,net	$ 67,680	( 70,500 - 2,820 )
	Average accounts receivable	$ 65,290	( 62,900 + 67,680 ) / 2
	Receivable turnover ratio	8.70	(568,000 / 65,290 )

4.)	Under IFRS, It will be "Trade & Other receivables".