Recording Bad Debts and Interpreting Disclosure of Allowance for Doubtful Accounts

Jayco Inc. started its operations in 2016. Its sales, all on account, totalled $700000. The company collected $500000 in cash from customers during the year and wrote off $8000 in uncollectible accounts. The company set up an allowance fro doubtful accounts at December 31, 2016, its fiscal year end, and determined the account balance to be $14000. The unadjusted balances of selected accounts at December 31, 207, are as follows:

Account Receivable $300000

Allowance for doubtful accounts(debit) 10000

Sales revenue(including 80 percent in sales on account) 800000

Aging of the accounts receivable on December 31, 2017, resulted in an estimate of $11000 in potentially uncollectible accounts

Required:

1. Prepare the journal entries to record all the transactions during 2016 and post them appropriate T-accounts
2. Prepare the journal entries to record all the transactions during 2017 and post them appropriate T-accounts
3. Compute the receivables turnover ratio and the average collection period for 2017, and comment on the results
4. Does the write-off of accounts receivable affect the current ratio? Explain
5. Does the recording of bad debt expense affect the receivables turnover ratio? Explain