Question

At December 31, 2021, Blossom Imports reported this information on its balance sheet. Accounts receivable $592,000 Less: Allowance for doubtful accounts 41,000 During 2022, the company had the following transactions related to receivables. 1. Sales on account $2,780,000 2. Sales returns and allowances 50,000 3. Collections of accounts receivable 2,480,000 4. Write-offs of accounts receivable deemed uncollectible 44,000 5. Recovery of bad debts previously written off as uncollectible 17,000 Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable. (Omit cost of goods sold entries.) (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit 1. enter an account title to record the first transaction enter a debit amount enter a credit amount enter an account title to record the first transaction enter a debit amount enter a credit amount 2. enter an account title to record the second transaction enter a debit amount enter a credit amount enter an account title to record the second transaction enter a debit amount enter a credit amount 3. enter an account title to record the third transaction enter a debit amount enter a credit amount enter an account title to record the third transaction enter a debit amount enter a credit amount 4. enter an account title to record the fourth transaction enter a debit amount enter a credit amount enter an account title to record the fourth transaction enter a debit amount enter a credit amount 5. enter an account title to record the fifth transaction to reinstate account previously written off enter a debit amount enter a credit amount enter an account title to record the fifth transaction to reinstate account previously written off enter a debit amount enter a credit amount (To reinstate account previously written off) enter an account title to record the fifth transaction enter a debit amount enter a credit amount enter an account title to record the fifth transaction enter a debit amount enter a credit amount (To record collection of accounts receivable) eTextbook and Media List of Accounts Enter the January 1, 2022, balances in Accounts Receivable and Allowance for Doubtful Accounts, post the entries to the two accounts and determine the balances. (Post entries in the order of journal entries posted in the previous part) Accounts Receivable choose a transaction date enter a debit amount choose a transaction date enter a credit amount choose a transaction date enter a debit amount choose a transaction date enter a credit amount choose a transaction date enter a debit amount choose a transaction date enter a credit amount choose a transaction date enter a debit amount choose a transaction date enter a credit amount choose the end date of the accounting period enter a debit balance choose the end date of the accounting period enter a credit balance Allowance for Doubtful Accounts choose a transaction date enter a debit amount choose a transaction date enter a credit amount choose a transaction date enter a debit amount choose a transaction date enter a credit amount choose the end date of the accounting period enter a debit balance choose the end date of the accounting period enter a credit balance eTextbook and Media List of Accounts Prepare the journal entry to record bad debt expense for 2022, assuming that aging the accounts receivable indicates that estimated bad debts are $49,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit enter an account title for the journal entry to record the bad debt expense for 2022 enter a debit amount enter a credit amount enter an account title for the journal entry to record the bad debt expense for 2022 enter a debit amount enter a credit amount eTextbook and Media List of Accounts Compute the accounts receivable turnover. (Round answer to 1 decimal place, e.g. 12.4.) Accounts receivable turnover enter the accounts receivable turnover in times rounded to 1 decimal place times eTextbook and Media List of Accounts Compute the average collection period. (Round answer to 1 decimal place, e.g. 12.4. Use 365 days for calculation.) Average collection period enter the average collection period in days rounded to 1 decimal place days eTextbook and Media List of Accounts

Answer 1

1. The journal entries are presented below:

Date	Account Title	Debit	Credit
1	Account receivable A/c	$2,780,000
	Sales Revenue		$2,780,000
	(Being the goods are sold on credit)
2	Sales return and allowance A/c	$50,000
	Account receivable A/c		$50,000
	(Being sales return is recorded)
3	Cash A/c	$2,480,000
	Accounts Receivable		$2,480,000
	(Being cash is received)
4	Allowance for Doubtful Accounts A/c	$44,000
	Account receivable A/c		$44,000
	(Being written off amount is recorded)
5	Account receivable A/c	$17,000
	Allowance for Doubtful Accounts A/c		$17,000
	(Being uncollected amount is recorded)
	Cash A/c	$17,000
	Accounts Receivable		$17,000
	(Being recovery of bad debt is recorded)

2. The T-Accounts are shown below:

Allowance for Doubtful Debts
Written off	$44,000	Beginning balance	$41,000
		Uncollectible	$17,000
		Closing Balance	$14,000

3. Bad debt expense A/c Dr                           $35,000

     ($49,000 - $14,000)

Allowance for doubtful debts                                     $35,000

(Being bad debt expense is recorded)

4. 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 $2,780,000

And, the Average accounts receivable would be

= (Accounts receivable, beginning of year + Accounts receivable, end of year) ÷ 2

= ( $551,000 + $784,000) ÷ 2

= $667,500

The Accounts receivable, beginning of year would be

=(opening balance of accounts receivable – opening balance of allowance for doubtful debts)

= $592,000 - $41,000

= $551,000

The Accounts receivable, ending of year would be

=(closing balance of accounts receivable – closing balance of allowance for doubtful debts)

= $798,000 - $14,000

= $784,000

So, the accounts receivable turnover ratio would be

= $2,780,000 ÷ $667,500

= 4.16 times

The computation of the average collection period is given below:

Average collection period = 365 days/Accounts receivable turnover ratio

                                          = 365/4.16

                                           = 87.7 days equals to 88 days