Reference no: EM132802851

A Inc. started business in 2019. Its sales during 2019, all on account, totalled $700,000. The company collected $500,000 in cash from customers during the year and wrote off $8,000 in uncollected accounts. The company set up an allowance for doubtful accounts at Dec 31,2019, its fiscal year-end, and determined the account balance to be $14,000.

The unadjusted balances of selected accounts at December 31,2020 are as follows:

Account receivable $300,000
Allowance for doubtful accounts (debit) 10,000
Sales revenue (including 80 percent in sales on account) 800,000

Aging of the accounts receivable on Dec 31,2020, resulted in an estimate of $11,000 in potentially uncollectible accounts.

Problem 1: prepare the journal entries to record all the transactions during 2019 and post them to appropriate T-accounts.

Problem 2: prepare the journal entries to record all the transactions during 2020 and post them to appropriate T-accounts.

Problem 3: compute the receivables turnover ratio and the average collection period for 2020, and comment on the results.

Problem 4: Does the write-off accounts receivable affect the current ratio? Explain.

Problem 5: Does the recording of bad debt expense affect the receivables turnover ratio? Explain.