CC8-1 Accounting for Receivables and Uncollectable Accounts [LO2, LO4]

The following transactions occurred over the months of September to December 2017 at Nicoles Getaway Spa (NGS).

September	Sold spa merchandise to Ashley Welch Beauty for $10,200 on account; the cost of these goods to NGS was $5,100.
October	Sold merchandise to Kelly Fast Nail Gallery for $6,750 on account; the cost of these goods to NGS was $3,000.
November	Sold merchandise to Raea Gooding Wellness for $2,400 on account; the cost of these goods to NGS was $1,590.
December	Received $6,800 from Ashley Welch Beauty for payment on its account.

Required: 1. Prepare journal entries for each of the transactions. Assume a perpetual inventory system. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. Estimate the Allowance for Doubtful Accounts required at December 31, 2017, assuming NGS uses the aging of accounts receivable method with the following uncollectable rates: one month, 2 percent; two months, 6 percent; three months, 20 percent; more than three months, 35 percent.

3. The Allowance for Doubtful Accounts balance was $1,450 (credit) before the end-of-period adjusting entry was made. Prepare the journal entry to account for the Bad Debt Expense.

4. Assume the end of the previous year showed net accounts receivable of $1,010, and net sales for the current year is $12,500. Calculate the accounts receivable turnover ratio. (Round your answer to 1 decimal place.)

5. Audreys Mineral Spa has an accounts receivable turnover ratio of 2.0 times. Which company is doing a better job in collecting receivables from customers?

multiple choice

• Nicole's Getaway Spa

• Audrey's Mineral Spa