Reference no: EM132909259
Question - IceKreme Inc. makes ice cream machines for sale to ice cream parlours. The following events occurred between April 1 and June 30, 2020:
April 10: Received an order from Peter's Appliances, a wholesaler, for 32 machines.
April 30: Sold 48 machines to Yuri Inc. on credit.
May 1: The purchasing manager of Peter's Appliances visited IceKreme's factory and purchased 34 machines on credit, instead of the 32 machines that were previously ordered.
May 5: Yuri Inc. paid for the machines purchased on April 30.
May 7: Sold 15 machines to Cheng Ltd. on credit.
May 10: Wrote off $14,000 of accounts receivable that were considered uncollectible. These receivables relate to sales made prior to April 1, 2020.
May 15: Peter's Appliances returned three defective machines and paid the amount due.
June 1: Received $180,000 from Cheng Ltd. on account.
June 30: Recovered $3,500 from the receivables that were written off on May 10.
Additional information is as follows:
-IceKreme sold all machines at $15,000 per unit.
-All of IceKreme's sales were on credit with terms 3/10, n/30.
-IceKreme's records included the following items and their balances as at March 31, 2020:
Accounts receivable $70,000 Allowance of doubtful accounts (credit balance) 21,600 Net sales 700,000
Required -
1. Prepare the journal entries to record the transactions that occurred from April 1 to June 30, 2020. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
2. The company uses the aging of accounts receivable method to determine the amount of bad debt expense. The estimated uncollectible rates for the various age groups are as follows: (Hint: Use a timeline to keep track of accounts receivable in order to determine the age of these receivables.)
Aging of accounts receivable Not yet due1-30 days
past due 31-60 days
past due Over 60 days
past due Estimated % uncollectible 5% 10% 15% 20%
a. Determine the amount of receivables that may not be collectible in the future as on June 30, 2020.
b. Prepare the journal entry to record bad debt expense at June 30, 2020, the company's fiscal year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
3. IceKreme's net accounts receivable were $180,000 at June 30, 2019. Calculate IceKreme's average collection period for fiscal year 2020. (Use 365 days a year. Round intermediate calculations to 2 decimal places. Round the final answer to 1 decimal place.)
4. This part of the question is not part of your Connect assignment.