Reference no: EM131819368

Question - Evaluate the following scenarios, assuming both companies use the net credit sales as the basis for estimating bad debts expense:

1. At year-end, Thompson Company has accounts receivable of $ 82,000. The allowance for uncollectible accounts has a balance prior to adjustment of $ (200). Net credit sales for the year were $ 275,000 and 3% is estimated to be uncollectible.

2. At year-end, Starges Company has accounts receivable of $ 85,000. The allowance for uncollectible accounts has a balance prior to adjustment of $ 300. Net credit sales for the year were $ 275,000 and 3% is estimated to be uncollectible.

Required:

For each situation described above, compute the following:

a. The bad debts expense for the year

b. The balance in the allowance for uncollectible accounts account at year-end

c. The net realizable value of accounts receivable at year-end

d. Assuming Thompson Company had an accounts receivable balance of $ 75,000 at the beginning of the year, what is Thompson's accounts receivable turnover ratio for the year?

e. Assuming Starges Company had an accounts receivable balance of $ 89,000 at the beginning of the year, what is Starges' accounts receivable turnover ratio for the year?