The following data is from the current accounting records of Florence Company Cash $360 Accounts receivable (net of allowance of $120) 600 Inventory 450 Other current assets 240 319 510 Accounts payable Other current liabilities The president of the company is concerned that the company is in violation of a debt covenant that requires the company to maintain a minimum current ratio of 2.0. He believes the best way to rectify this is to reverse a bad debt write-off in the amount of $30 that the company just recorded. He argues that the write- off was done too early and that the collections department should be given more time to collect the outstanding receivables. The CFO argues that this will have no effect on the current ratio, so a better idea is to use $30 of cash to pay accounts payable early. Florence Company uses the allowance method to account for bad debts.

The following data is from the current accounting records of Florence Company Cash $360 Accounts receivable (net of allowance of $120) 600 Inventory 450 Other current assets 240 319 510 Accounts payable Other current liabilities The president of the company is concerned that the company is in violation of a debt covenant that requires the company to maintain a minimum current ratio of 2.0. He believes the best way to rectify this is to reverse a bad debt write-off in the amount of $30 that the company just recorded. He argues that the write- off was done too early and that the collections department should be given more time to collect the outstanding receivables. The CFO argues that this will have no effect on the current ratio, so a better idea is to use $30 of cash to pay accounts payable early. Florence Company uses the allowance method to account for bad debts.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 6PB: Ink Records recorded $2,333,898 in credit sales for the year and $1,466,990 in accounts receivable....

See similar textbooks

Similar questions

Bristax Corporation recorded $1,385,660 in credit sales for the year, and $732,410 in accounts receivable. The uncollectible percentage is 3.1% for the income statement method and 4.5% for the balance sheet method. A. Record the year-end adjusting entry for 2018 bad debt using the income statement method. B. Record the year-end adjusting entry for 2018 bad debt using the balance sheet method. C. Assume there was a previous debit balance in Allowance for Doubtful Accounts of $20,550; record the year-end entry for bad debt using the income statement method, and then the entry using the balance sheet method. D. Assume there was a previous credit balance in Allowance for Doubtful Accounts of $17,430; record the year-end entry for bad debt using the income statement method, and then the entry using the balance sheet method.
1. The following accounts receivable information pertains to Growth Markets LLC. Past-Due Category 0-30 days 31-90 days Over 90 days Accounts Receivable Total $22,480 36,540 15,330 What is the total uncollectible estimated bad debt for Growth Markets LLC? Year 2017 2018 2019 2. Using the following select financial statement information from Black Water Industries, compute the accounts receivable turnover ratios for 2018 and 2019 (round answers to two decimal places). What do the outcomes tell a potential investor about Black Water Industries? BLACK WATER INDUSTRIES Percentage Uncollectible Net Credit Sales $685,430 700,290 768,500 6% 17% 25% Ending Accounts Receivable $330,250 360,450 401,650
Use the following information from financial statements of Hamilton Inc. Information from Balance Sheet Accounts: 12/31/2020 12/31/2021 Accounts receivable, gross Allowance for uncollectible accounts 5,000 70,000 90,000 Advances from customers 1,600 600 Information from Income Statement Accounts: Revenue (gross) carned during 2021 277,000 Bad debt expense in 2021 5,200 Other Information: Accounts receivable of 3,900 were written off during the year 2021.
Current Ratio, Quick Ratio, and Times-Interest-Earned Ratio The following data is from the current accounting records of Florence Company: Cash $336 Accounts receivable (net of allowance of $112) 560 Inventory 420 224 305 476 Other current assets Accounts payable Other current liabilities The president of the company is concerned that the company is in violation of a debt covenant that requires the company to maintain a minimum current ratio of 2.0. He believes the best way to rectify this is to reverse a bad debt write-off in the amount of $28 that the company just recorded. He argues that the write-off was done too early and that the collections department should be given more time to collect the outstanding receivables. The CFO argues that this will have no effect on the current ratio, so a better idea is to use $28 of cash to pay accounts payable early. Florence Company uses the allowance method to account for bad debts. a. Calculate the current ratio under the following scenarios:…
The following information was taken from the accounts receivable records of Sarasota Corporation as at December 31, 2020: OutstandingBalance Percentage Estimatedto be Uncollectible 0 – 30 days outstanding $160,000 0.5% 31 – 60 days outstanding 66,000 2.5% 61 – 90 days outstanding 40,200 4.0% 91 – 120 days outstanding 20,600 6.5% Over 120 days outstanding 5,600 10.0% (a) Prepare the year-end adjusting entry for bad debt expense, assuming allowance for doubtful accounts had a credit balance of $1,200 prior to the adjustment (b) Prepare the year-end adjusting entry for bad debt expense, assuming allowance for doubtful accounts had a debit balance of $3,880 prior to the adjustment.
The financial data for A Company is the following: Balance sheet data (in $ millions) at 12/31 Accounts receivable Less: allowance for doubtful accounts Accounts receivable (net) Income statement data, year ending 12/31 Net sales (assume all on credit) Uncollectible accounts expense 2021 $ 500 150 350 2020 $ 450 140 310 $33,400 $21,500 100 110 1. Compute the accounts receivable turnover ratio for 2021 and 2020. 2. Wat amount of accounts receivable was collected in 2021? 3. How much was the write off of uncollectible accounts in 2021? 2019 $410 160 250 $19,200 95
The following information was taken from the accounts receivable records of Pina Colada Corporation as at December 31, 2020: OutstandingBalance Percentage Estimatedto be Uncollectible 0 – 30 days outstanding $154,000 0.5% 31 – 60 days outstanding 63,200 2.5% 61 – 90 days outstanding 39,100 4.0% 91 – 120 days outstanding 21,600 6.5% Over 120 days outstanding 5,300 10.0% (a) Prepare the year-end adjusting entry for bad debt expense, assuming allowance for doubtful accounts had a credit balance of $1,170 prior to the adjustment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (b) Prepare the year-end adjusting entry for bad debt expense, assuming allowance for doubtful accounts had a debit balance of $3,990 prior to…
The following information was taken from the accounts receivable records of Monty Corporation as at December 31, 2020: OutstandingBalance Percentage Estimatedto be Uncollectible 0 – 30 days outstanding $156,000 0.5% 31 – 60 days outstanding 65,400 2.5% 61 – 90 days outstanding 40,000 4.0% 91 – 120 days outstanding 20,800 6.5% Over 120 days outstanding 5,100 10.0% (a) Prepare the year-end adjusting entry for bad debt expense, assuming allowance for doubtful accounts had a credit balance of $1,280 prior to the adjustment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (b) Prepare the year-end adjusting entry for bad debt expense, assuming allowance for doubtful accounts had a debit balance of $4,010 prior to the…
The following information was taken from the accounts receivable records of Pina Colada Corporation as at December 31, 2020: OutstandingBalance Percentage Estimatedto be Uncollectible 0 – 30 days outstanding $154,000 0.5% 31 – 60 days outstanding 63,200 2.5% 61 – 90 days outstanding 39,100 4.0% 91 – 120 days outstanding 21,600 6.5% Over 120 days outstanding 5,300 10.0% (a) Prepare the year-end adjusting entry for bad debt expense, assuming allowance for doubtful accounts had a credit balance of $1,170 prior to the adjustment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (b) Prepare the year-end adjusting entry for bad debt expense, assuming allowance for doubtful accounts had a debit balance of $3,990 prior to…
The following data are taken from the financial statements of Colby Company. Accounts receivable (net), end of year Net sales on account Terms for all sales are 1/10, n/45 Accounts Receivable turnover Average collection period (b) 2022 $550,000 2022 2021 4,300,000 4,000,000 7.9 times $540,000 2021 7.5 times 46.2 days 48.7 days What conclusions about the management of accounts receivable can be drawn from the accounts receivable turnover and the average collections period.
A balance sheet extract of Kahwati Ltd. reported as at 30 June, 2020; Accounts Receivable $981 485 Allowance for Doubtful Debts (18 950) The company recorded the following for the year ending 30 June, 2021: Credit sales income totalling, $1 638 000 Credit sales returns totalling, $21 360 Accounts receivable collections, $1 893 000 Accounts receivable written off – uncollectable $17 695 Based on ageing of accounts receivable analysis undertaken at the end of June, 2021 the company decided that the Allowance for Doubtful Debts account should have a credit balance of $21 250 on the Balance Sheet at June 30, 2021
After analyzing its accounts receivable at year-end, a company arrives at the following age categories along with the percentages estimated as uncollectible. Age of Accounts 0-30 days past due 31-60 days past due 61-120 days past due 121-180 days past due Over 180 days past due [Select] ✔ Accounts Receivable Estimated Uncollectible % Transaction Report bad debt expense $134,000 46,000 29,000 [Select] 13,000 9,000 $231,000 Assets The year-end balance of the allowance for uncollectible accounts before any adjustment is $2,300. Use the information above to answer the following questions. a. What amount of bad debt expense will the company report in its income statement for the current year? 2.0% 3.0% b. Use the financial statement effects template to show the impact of reporting this year's bad debt expense. If there is no net change in an item, select 'no net change. Balance Sheet Liabilities = 6.0% 12.0% 20.0% [Select] + Equity [Select] c. What is the net accounts receivable balance…