Problem 9-1a

Prepare the journal entries to record each of these five transactions

1. Sales on account $3,200,000

Dr Accounts receivable (AR) $3,200,000

Cr Sales $3,200,000

2. Sales returns and allowances 50,000

Dr Sales returns and allowances 50,000

Cr AR 50,000

3. Collections of accounts receivable 2,810,000

Dr Cash 2,810,000

Cr AR 2,810,000

4. Write-offs of accounts receivable deemed uncollectible 90,000

Dr Allowance for Doubtful Accounts (ADA) 90,000

Cr AR 90,000

5. Recovery of bad debts previously written off as uncollectible 24,000

Dr AR 24,000

Cr ADA 24,000

(To reinstate the account)

Dr Cash 24,000

Cr AR 24,000

(To record the collection)

Can't draw a T-account here, but I'll tell you the entries.

Accounts Receivable account

On the debit (left) side of the T, enter

Bal. b/f $960,000

Sales $3,200,000

Reinstate bad debt $24,000

Total debits $4,184,000

On the credit (right) side of the T, enter

Sales returns $50,000

Collections $2,810,000

Written off $90,000

Collected $24,000

Total credits $2,974,000

Bal. in AR account $1,210,000 Dr

Allowance for Doubtful Accounts account

On the debit side, enter

Write offs $90,000

Total debits $90,000

On the credit side, enter

Bal. b/f $80,000

Reinstate bad debt $24,000

Total credits $104,000

Bal. in ADA account $14,000 Cr.

Prepare the journal entry to record bad debts expense for 2008, assuming that an aging of accounts receivable indicates that expected bad debts are $115,000

Dr Bad debts expense $101,000

Cr ADA $101,000

Compute the accounts receivable turnover ratio for 2008

= Net Credit sales/Ave. net receivables

Ave. net receivables = (880,000 + 1,095,000)/2 = 987,500

AR turnover = 3,150,000/987,500 = 3.19 times