P9-1A

Prepare journal entries related to bad debt expense.

(LO 1, 2, 4)

At December 31, 2016, House Co. reported the following information on its balance sheet.

Accounts receivable	$960,000
Less: Allowance for doubtful accounts	80,000

During 2017, the company had the following transactions related to receivables.

1.	Sales on account	$3,700,000
2.	Sales returns and allowances	50,000
3.	Collections of accounts receivable	2,810,000
4.	Write-offs of accounts receivable deemed uncollectible	90,000
5.	Recovery of bad debts previously written off as uncollectible	29,000

Instructions

(a)

Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable.

(b)

Enter the January 1, 2017, balances in Accounts Receivable and Allowance for Doubtful Accounts, post the entries to the two accounts (use T-accounts), and determine the balances.

Accounts receivable $1,710,000

ADA $19,000

(c)

Prepare the journal entry to record bad debt expense for 2017, assuming that an aging of accounts receivable indicates that expected bad debts are $115,000.

Bad debt expense $96,000

(d)

Compute the accounts receivable turnover for 2017 assuming the expected bad debt information provided in (c).