Sullivan Equipment Sales showed the following.
2014
Jan. 15 Sold $25,000 of merchandise for $29,000 to JanCo; terms 3/5, n/15.
16 Wrote off Fedun's account in the amount of $15,000.
20 Collected the amount owing from the January 15 sale.
Mar. 1, Accepted a $12,000, 60-day, 7% note dated this day in granting Parker Holdings a time extension on its past-due account.
Apr. 15, Sold merchandise costing $62,000 for $71,000 to customers who used their Visa credit cards. Visa charges a 1% fee and deposits the cash electronically into the retailer's account immediately at the time of sale.
? Parker Holdings honoured the note dated March 1.
Nov. 1, Accepted a $24,000, three-month, 6% note dated this day in granting Grant
Company a time extension on its past-due account.
Dec. 31 Sullivan's year-end. Interest was accrued on outstanding notes receivable.
31 Bad debts are based on an aging analysis that estimated $9,700 of accounts receivable are uncollectible. Allowance for Doubtful Accounts showed an unadjusted credit balance of $1,600 on this date.
2015
? Grant Company dishonoured its note dated November 1, 2014. Mar.
5 Recovered $1,500 from Derek Holston that was previously written off.
14 Wrote off the Grant Company account.
Required
a. Determine the maturity dates of the March 1 and November 1 notes.
b. Prepare entries as appropriate for each date.
Analysis Component:
Sullivan's receivable turnovers at December 31, 2014 and 2015 were 7 and 7.5, respectively. Explain what this ratio measures and whether the change in the ratio for Sullivan was favourable or unfavourable.