Calculate receivables turnover ratio and average collection

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During its first year of operations, Ketter Company had credit sales of $3,000,000, of which $400,000 remained uncollected at year-end. The credit manager estimates that $18,000 of these receivables will become uncollectible.

(a) Prepare the journal entry to record the estimated uncollectibles. (Assume an unadjusted balance of zero in Allowance for Doubtful Accounts.)

(b) Prepare the current assets section of the balance sheet for Ketter Company, assuming that in addition to the receivables it has cash of $90,000, merchandise inventory of $180,000, and supplies of $13,000.

(c) Calculate the receivables turnover ratio and average collection period. Assume that average net receivables were $300,000. Explain what these measures tell us.

Reference no: EM13511762

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