AUDITING & ASSURANCE SERVICES CONNECT AC
10th Edition
ISBN: 9781259292057
Author: MESSIER
Publisher: MCG
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Chapter 10, Problem 10.17MCQ
To determine
Concept Introduction:
Accounts receivables turnover ratio indicates the ratio between the credit sales and accounts receivables. This ratio is calculated by dividing the credit sales by the average balance of accounts receivables.
To choose: the possible reason for decrease in accounts receivable turnover ratio.
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Students have asked these similar questions
The credit manager of Sweet Sales Inc. has gathered the following information about the company's accounts receivable and credit
losses during the current year:
Net credit sales for the year
Accounts receivable at year-end
Uncollectible accounts receivable:
Actually written off during the year
Estimated portion of year-end receivables expected to
prove uncollectible (per aging schedule)
$91,000
84,000
$7,500,000
1,750,000
175,000
a. Uncollectible accounts expense is estimated at an amount equal to 2.5 percent of net credit sales.
b. Uncollectible accounts expense is recognized by adjusting the balance in the Allowance for Doubtful Accounts to the amount
indicated in the year-end aging schedule. The balance in the allowance account at the beginning of the current year was $25,000.
(Consider the effect of the write-offs during the year on the balance in the Allowance for Doubtful Accounts.)
c. The company uses the direct write-off method of accounting for urlcollectible accounts.
Prepare…
Question No 2:
The credit manager of Montour Fuel has gathered the following information about the company's
accounts receivable and credit losses during the current year:
Net credit sales for the year..
S8,000,000
Accounts receivable at year-end.
1,750,000
Uncollectible accounts receivable:
Actually written off during the year.
$96,000
Estimated portion of year-end receivables expected to prove
uncollectible (per aging schedule)..
84,000
180,000
Prepare one journal entry summarizing the recognition of uncollectible accounts expense for the
entire year under each of the following independent assumptions:
a. Uncollectible accounts expense is estimated at an amount equal to 3.5 percent of net credit sales.
b. Uncollectible accounts expense is recognized by adjusting the balance in the Allowance for Doubtful
Accounts to the amount indicated in the year-end aging schedule. The balance in the allowance account
at the beginning of the current year was $35,000. (Consider the effect of the…
Activity measures:
m. Calculate the accounts receivable turnover and number of days' sales in accounts receivable (based on a 365-day year) for the most
recent year.
n. Based on your analysis in m, do you believe that the company is doing an effective job at managing accounts receivable? What would you
estimate the industry averages to be for the accounts receivable turnover and number of days' sales in accounts receivable? Explain.
o. Calculate the inventory turnover and number of days' sales in inventory (based on a 365-day year) for the most recent year.
p. Based on your analysis in o, to what extent does the company need to be concerned about its inventory management policies? In
assessing the inventory management policies, would you be more interested in knowing current ratio or acid-test ratio information?
Explain.
Chapter 10 Solutions
AUDITING & ASSURANCE SERVICES CONNECT AC
Ch. 10 - Prob. 10.1RQCh. 10 - Prob. 10.2RQCh. 10 - Prob. 10.3RQCh. 10 - Prob. 10.4RQCh. 10 - Prob. 10.5RQCh. 10 - Prob. 10.6RQCh. 10 - Prob. 10.7RQCh. 10 - Prob. 10.8RQCh. 10 - Prob. 10.9RQCh. 10 - Prob. 10.10RQ
Ch. 10 - Prob. 10.11RQCh. 10 - Prob. 10.12MCQCh. 10 - Prob. 10.13MCQCh. 10 - Prob. 10.14MCQCh. 10 - Prob. 10.15MCQCh. 10 - Prob. 10.16MCQCh. 10 - Prob. 10.17MCQCh. 10 - Prob. 10.18MCQCh. 10 - Prob. 10.19MCQCh. 10 - Prob. 10.20MCQCh. 10 - Prob. 10.21MCQCh. 10 - Prob. 10.22MCQCh. 10 - Prob. 10.23MCQCh. 10 - Prob. 10.24PCh. 10 - Prob. 10.25PCh. 10 - Prob. 10.26PCh. 10 - Prob. 10.27PCh. 10 - Prob. 10.28PCh. 10 - Prob. 10.29PCh. 10 - Prob. 10.30P
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- An auditor's analytical procedures have revealed that the accounts receivable of a client have doubled since the end of the prior year. However, the allowance for doubtful accounts, as a percentage of accounts receivable remained about the same. Which of the following client explanations most likely would satisfy the auditor? a. Credit standards were liberalized in the current year. b. Twice as many accounts receivable were written off in the prior year as compared to this year. c. A greater percentage of accounts were currently listed in the "more than 90 days overdue" category than in the prior year. d. The client opened a second retail outlet in the current year and its credit sales approximately equaled the older, established outlet.arrow_forwardFlorence Company had a debit balance of $1,500 in the Allowance for Doubtful Accounts account and a debit balance of $500,000 in the Accounts Receivable account with Credit Sales of $1,500,000 for the year. Management estimates 1.5% of credit sales will become uncollectible. What is the amount of estimated bad debts expense?arrow_forwardPlease answer fast without plagiarism detectorarrow_forward
- 2. Grill's Flooring Limited had credit sales of $400,000 in 2007 and a debit balance of $600 in the Allowance for Doubtful Accounts at year end. As of December 31, 2007, $120,000 of accounts receivable remains uncollected. The credit manager of Grill's Flooring prepared an aging schedule of accounts receivable and estimates that $5,000 will prove to be uncollectible. /5 marks On March 4, 2008 the credit manager authorizes a write-off of the $1,000 balance owed by A. Ludwig. Instructions a. Prepare the adjusting entry to record the estimated uncollectible accounts expense in 2007. b. Show the balance sheet presentation of accounts receivable on December 31, 2007. On March 4, 2008 assume the balance of Accounts Receivable account is $160,000 and the balance of Allowance for Doubtful Accounts is a credit of $3,000, before the write- С. off. Make the appropriate entry to record the write-off of the Ludwig account. Also calculate the net realizable value of accounts receivable before and…arrow_forwarddarrow_forwardAlso, What would be the Net Realizable Value of Harris Company’s Accounts Receivable at year end after the adjusting entry for bad debts has been recorded?arrow_forward
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