At December 31, 2018, House Co. reported the toilowing information on its balanc

Question

At December 31, 2018, House Co. reported the toilowing information on its balance sheet RCES Accounts receivable Less: Allowance for doubtful accounts $960,000 80,000 During 2019, the company had the following transactions related to receivables. 1. Sales on account 2. Sales returns and allowances 3. Collections of accounts receivable 4. Write-offs of accounts receivable deemed uncollectible 5. Recovery of bad debts previously written of as uncollectible 29,000 $3,700,000 50,000 2,810,000 90,000 Study Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No Account Titles and Explanation 1. Debit Credit 2. 3.

Explanation / Answer

House Co. S.No. Particular Amount (Dr) Amount (Cr) 1 Accounts Receivable $         3,700,000.00     To Sales $            3,700,000.00 (Being amount of sales on account) 2 Sales Return & Allowances $               50,000.00     To Accounts Receivable $                  50,000.00 (Being amount of Sales Return & Allowances) 3 Cash $         2,810,000.00      To Accounts Receivable $            2,810,000.00 (Being amount of cash received from customer) 4 Allowance for Doubtful Accounts $               90,000.00       To Accounts Receivable $                  90,000.00 (Being amount of write-offs of accounts receivable deemed uncollectible) 5 Accounts Receivable $               29,000.00     To Allowance for doubtful Accounts $                  29,000.00 (Being amount of account reinstated earlier write of as unrecoverable) 6 Cash $               29,000.00     To Accounts Receivable $                  29,000.00 (Being amount of cash received earlier treated as unrecoverable) Accounts Receivable Amount Amount Bal $                                                                                  960,000.00 2) $                  50,000.00 1) $                                                                              3,700,000.00 3) $            2,810,000.00 5) $                                                                                    29,000.00 4) $                  90,000.00 5) $                  29,000.00 Bal $                                                                              1,710,000.00 Allowance for doubtful accounts Amount Amount 4) $                                                                                    90,000.00 Bal $                  80,000.00 5) $                  29,000.00 Bal $                  19,000.00 c ) Beginning Balance $               19,000.00 Add: Balance needed $            115,000.00 Adjustment required $               96,000.00 d) S.No. Particular Amount (Dr) Amount (Cr) Bad Debt $               96,000.00      To Allowance for doubtful accounts $                  96,000.00 (Being amount of bad debt ) e) Accounts Receivable Turnover Ratio Beginning Accounts Receivable=($960000-$80000) $            880,000.00 Ending Accounts Receivable=($1710000-$115000) $         1,595,000.00 Net Credit Sales=Sales-Sales Return & Allowances=($3700000-$50000) $         3,650,000.00 Average Turnover=($880000+$1595000)/2 $         1,237,500.00 Accounts Receivable Turnover Ratio=(Net Credit Sales/Average Turnover) Accounts Receivable Turnover Ratio=($3650000/$1237500) $                         2.95 times

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