P6-6 Determining Bad Debt Expense Based on Aging Analysis and Interpreting Ratios LO6-4 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 Peter's Appliances, a wholesaler, for 24 machines. April 30: Sold 36 machines to Yuri Inc. on credit. May 1: The purchasing manager of Peter's Appliances visited Icekreme's factory and purchased 26 machines on credit, May 5: Yuri Inc, paid for the machines purchased on April 30. May 7: Sold 15 machines to Cheng Ltd. on credit. May 10: Wrote off $19,000 of accounts receivable that were considered uncollectible. These receivables relate to sales May 15: Peter's Appliances returned three defective machines and paid the amount due. June 1: Received $180,000 from Cheng Ltd. on account. June 30: Recovered $3,100 from the receivables that were written of f on May 10. Additional information is as follows: - IceKreme sold all machines at $15,000 per unit. - All of IceKreme's sales were on credit with terms 3/10, n/30. - IceKreme's records included the following items and their balances as at March 31, 2020: 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.) Journal entry worksheet Ivote: Enter aedits derore credits. 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.) a. Determine the amount of receivables that may not be collectible in the future as on June 30,2020. b. Prepare the journal entry to record bad debt expense at June 30,2020 , the company's 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 Record the bad debt expenses estimated for the period. Note: Enter debits before credits. 1 Record the receipt of order from Peter's Appliance. 2 Record the sale of machines on credit to Yuri Inc. 3 Record the sale of machines to Peter's Appliance. 4 Record payment received for sale on credit to Yuri Inc. 5 Record the sale of machines on credit to Cheng Ltd. 6 Record the entry to write-off uncollectible accounts receivable. 7 Record the return of defective machine by Peter's Appliance. Note: = journal entry has been entered 5 Record the sale of machines on credit to Cheng Ltd. 6 Record the entry to write-off uncollectible accounts receivable. 7 Record the return of defective machine by Peter's Appliance. 8 Record receipt of cash from Cheng Ltd. 9 Record the entry for reinstatement of accounts written off. 10 Record amount collected against trade receivable written off. Note: = journal entry has been entered 3. IceKreme's net accounts receivable were $180,000 at June 30,2019 . Calculate IceKreme's 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.)
