The Hawkeye Limos reported the following information related to limousine rentals for

2017 and 2018:

2018

2017

Limo rental revenue

$ 150,000

$ 175,000

Bad debt expense

?

$ 900

Accounts receivable

$ 34,375

$ 15,600

Allowance for doubtful accounts

?

$ -

Unearned rent revenue

$ 4,500

$ 6,500

Write offs

$ 400

$ 900

Aging of Accounts receivable at 12/31.

Not yet due

$ 13,395

$ 15,600

From 1 to 30 days past due

4,500

From 31 to 60 days past due

3,400

Over 60 days past due

13,080

$ 34,375

$ 15,600

Required:

A. Prepare the journal entries to record the following selected transactions from

December 2018:

a. Received an advance payment of $500 for a Valentines Day rental.

b. Received $750 for a New Years Eve rental.

c. Wrote off a $400 receivable from a Halloween rental.

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B. Assuming all rentals are on credit, calculate the following:

a. The accounts receivable turnover ratio for 2017. Accounts receivable totaled

$14,000 at 12/31/16.

b. Days credit sales outstanding at 12/31/17.

C. Hawkeye estimates collection rates on accounts receivable will be 100% for accounts

not yet due, 98% for accounts between 1 and 30 days past due, 95% for accounts

between 31 and 60 days past due, and 75% for accounts more than 60 days past due.

a. Calculate the allowance for doubtful accounts at 12/31/18, and 2018 bad debt

expense using the percentage of credit sales method. Assume all sales are

credit sales.

b. Calculate the allowance for doubtful accounts at 12/31/18, and 2018 bad debt

expense using the aging of accounts receivable method.

c. Which set of estimate is preferable? Explain why. Your answer should be

specific to Hawkeyes situation.

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d. Calculate cash collected from customers assuming Hawkeye uses the aging

method to calculate bad debt expense.

e. Show what would have been be reported under operating cash flows using the

indirect method for 2018. Assume Hawkeye chose the percentage of sales

method to estimate bad debts.