Question
ceKreme Inc. makes ice cream machines for sale to ice cream parlours. The following events occurred between April 1 and June 30, 2020: April 10:
ceKreme 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 Peters Appliances, a wholesaler, for 16 machines. | ||
April | 30: | Sold 24 machines to Yuri Inc. on credit. | ||
May | 1: | The purchasing manager of Peters Appliances visited IceKremes factory and purchased 19 machines on credit, instead of the 16 machines that were previously ordered. | ||
May | 5: | Yuri Inc. paid for the machines purchased on April 30. | ||
May | 7: | Sold 10 machines to Cheng Ltd. on credit. | ||
May | 10: | Wrote off $15,000 of accounts receivable that were considered uncollectible. These receivables relate to sales made prior to April 1, 2020. | ||
May | 15: | Peters Appliances returned three defective machines and paid the amount due. | ||
June | 1: | Received $96,000 from Cheng Ltd. on account. | ||
June | 30: | Recovered $2,700 from the receivables that were written off on May 10. |
Additional information is as follows:
- IceKreme sold all machines at $12,000 per unit.
- All of IceKremes sales were on credit with terms 3/10, n/30.
- IceKremes records included the following items and their balances as at March 31, 2020:
Accounts receivable | $ | 54,000 | |
Allowance of doubtful accounts (credit balance) | 16,800 | ||
Net sales | 540,000 | ||
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.)
A. Record the receipt of order from Peter's Appliance. April 10
B. Record the sale of machines on credit to Yuri Inc. April 30
C. Record the sale of machines on credit to Yuri Inc. May 01
D. Record payment received for sale on credit to Yuri Inc. May 05
E. Record the sale of machines on credit to Cheng Ltd. May 07
F. Record the entry to write-off uncollectible accounts receivable. May 10
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 due | 130 days past due | 3160 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.
Amount uncollectable:
b. Prepare the journal entry to record bad debt expense at June 30, 2020, the companys fiscal year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Record the bad debt expenses estimated for the period -- June 30
3. IceKremes net accounts receivable were $96,000 at June 30, 2019. Calculate IceKremes 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.)
Average collecting period ____ days
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