Problem 1

Sally sold $300,000 worth of stuff last year. Her beginning balance in Accounts Receivable was $200,000 and her beginning credit balance in Allowance for Doubtful Accounts was $6,000. During the year she collected $280,000 on her receivables, and wrote off $9,000. She estimates that 3% of her receivables at any one time will not be collected. How much is her charge to Bad Debt Expense?

Problem 2

What is Sally's average collection period?

Problem 3

At December 31, 2015 Makenna's balance in Account Receivable was $200,000 and the balance in Allowance for Doubtful Accounts was $4,000. During 2016 she had credit sales of $1,000,000. She collected $850,000 on her accounts receivable during 2016. She wrote off $3,000 of accounts receivable during 2016. Makenna estimates that 2% of her receivables will never be collected. How much would the charge to Bad Debt Expense be for 2016. Show how this information will appear on the financial statements and calculate the accounts receivable turn and the average collection period.