On September 30, 2016 (the end of its fiscal year), Lufkin Corporation reported accounts receivable of $331,750 and an allowance for doubtful accounts of $16,700. During fiscal 2017, the following transactions occurred:

	Amount
Credit sales (terms, n/EOM)	$2,017,800
Collections on accounts receivable	1,956,000
Accounts receivable written off	16,200

On September 30, 2017, an aging of the accounts receivable balance indicated the following:

Age	Amount	Estimated
		Percentage
		Uncollectible
Under 30 days	$169,250	0.8%
3090 days	100,000	1.6
91180 days	55,900	5.0
181360 days	38,200	15.0
Over 360 days	14,000	40.0
	$377,350

	Required:
1.	Prepare the journal entries necessary to record the credit sales, collections on account, write-off of accounts receivable, and bad debts expense for Lufkin for fiscal 2017.
2.	What are Lufkins September 30, 2017, balances in Accounts Receivable and in its Allowance for Doubtful Accounts, and how will they be disclosed on the September 30, 2017, balance sheet?
3.	Compute Lufkins receivables turnover in days, assuming a 365-day business year. What is your evaluation of its collection policies?

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Chart of Accounts

CHART OF ACCOUNTS

Lufkin Corporation

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
122	Allowance for Doubtful Accounts
131	Inventory
141	Supplies
142	Prepaid Insurance
180	Land
181	Buildings and Equipment
182	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

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General Journal

Prepare the journal entries necessary to record the credit sales, collections on account, write-off of accounts receivable, and bad debts expense for Lufkin for fiscal 2017. Additional Information

For grading purposes, use September 30 to record summary transactions for events that occurred throughout the year.

PAGE 9

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7		Adjusting Entries
8
9

Solution

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7		Adjusting Entries
8
9

Points:

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Explanation

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Balance Sheet

Show how Lufkins September 30, 2017 balances in Accounts Receivable and Allowance for Doubtful Accounts are disclosed on the September 30, 2017 balance sheet. Additional Instruction

Use the minus sign to indicate all negative values. For ex: Allowance for Doubtful Accounts is entered -### for (###).

Question not attempted.

LUFKIN COMPANY

Partial Balance Sheet

September 30, 2017

1	Accounts Receivable
2	Allowance for doubtful accounts
3	Net receivables

Solution

LUFKIN COMPANY

Partial Balance Sheet

September 30, 2017

1	Accounts Receivable
2	Allowance for doubtful accounts
3	Net receivables

Points:

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Explanation

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Receivables Turnover

Compute Lufkins receivables turnover in days, assuming a 365-day business year.

Receivable Turnover in days: days