Question
IceKreme Inc. makes ice cream machines for sale to ice cream parlours. The following events occurred between April 1 and June 30, 2020: April 10:
IceKreme 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 34 machines. | ||
April | 30: | Sold 51 machines to Yuri Inc. on credit. | ||
May | 1: | The purchasing manager of Peters Appliances visited IceKremes factory and purchased 36 machines on credit, instead of the 34 machines that were previously ordered. | ||
May | 5: | Yuri Inc. paid for the machines purchased on April 30. | ||
May | 7: | Sold 20 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 two defective machines and paid the amount due. | ||
June | 1: | Received $96,000 from Cheng Ltd. on account. | ||
June | 30: | Recovered $3,600 from the receivables that were written off on May 10. |
Additional information is as follows:
- IceKreme sold all machines at $6,000 per unit.
- All of IceKremes sales were on credit with terms 2/10, n/30.
- IceKremes records included the following items and their balances as at March 31, 2020:
Accounts receivable | $ | 72,000 | |
Allowance of doubtful accounts (credit balance) | 22,200 | ||
Net sales | 720,000 | ||
|
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 of uncollectible:
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.)
Journal entry worksheet
|
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 collection period: __days
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started