ayco Inc. started its operations in 2022. Its sales during 2022, all on account, totalled $700,000. The company collected $500,000 in cash from customers during the year and wrote off $8,000 in uncollectible accounts. The company set up an allowance for doubtful accounts at December 31, 2022, its fiscal year-end, and determined the account balance to be $14,000. The unadjusted balances of selected accounts at December 31, 2023 are as follows: Accounts receivable $ 300,000 Allowance for doubtful accounts (debit) 10,000 Sales revenue (including 80 percent in sales on account) 800,000 Aging of the accounts receivable on December 31, 2023, resulted in an estimate of $11,000 in potentially uncollectible accounts. Required: 1. Prepare the journal entries to record all the transactions during 2022 and post them to appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 2. Prepare the journal entries to record all the transactions during 2023 and post them to appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 3. Compute the receivables turnover ratio and the average collection period for 2023. (Use 365 days a year. Round "Receivables turnover" to 2 decimal places and other answer to nearest whole number.) Receivables turnover = ? Average collection period = ? 4. Does the write-off of accounts receivable affect the current ratio? multiple choice 1 Yes No Correct 5. Does the recording of bad debt expense affect the receivables turnover ratio? multiple choice 2 Yes Correct No
ayco Inc. started its operations in 2022. Its sales during 2022, all on account, totalled $700,000. The company collected $500,000 in cash from customers during the year and wrote off $8,000 in uncollectible accounts. The company set up an allowance for doubtful accounts at December 31, 2022, its fiscal year-end, and determined the account balance to be $14,000.
The unadjusted balances of selected accounts at December 31, 2023 are as follows:
| Accounts receivable | $ | 300,000 | |
| Allowance for doubtful accounts (debit) | 10,000 | ||
| Sales revenue (including 80 percent in sales on account) | 800,000 | ||
Aging of the accounts receivable on December 31, 2023, resulted in an estimate of $11,000 in potentially uncollectible accounts.
Required:
1. Prepare the journal entries to record all the transactions during 2022 and post them to appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
2. Prepare the journal entries to record all the transactions during 2023 and post them to appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
3. Compute the receivables turnover ratio and the average collection period for 2023. (Use 365 days a year. Round "Receivables turnover" to 2 decimal places and other answer to nearest whole number.)
Receivables turnover = ?
Average collection period = ?
4. Does the write-off of accounts receivable affect the current ratio?
multiple choice 1
-
Yes
-
No Correct
5. Does the recording of bad debt expense affect the receivables turnover ratio?
multiple choice 2
-
Yes Correct
-
No
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