Chapter 8, Problem 8.9BE

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Allowance method:

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Accounts receivable turnover:

Accounts receivable turnover is a liquidity measure of accounts receivable in times, which is calculated by dividing the net credit sales by the average amount of net accounts receivables. In other words, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

Average collection period:

Average collection period indicates the number of days taken by a business, to collect its outstanding amount of accounts receivable on an average.

To Prepare: The journal entry in the books of Company G, to record the estimated uncollectible.

Given:

Company G has zero balance in its allowance for doubtful accounts, and its estimated uncollectible receivables are $18,000.

(b)

To determine

To prepare: The current asset section of Company G’s balance sheet.

(c)

To determine

To calculate: The accounts receivable turnover and average collection period of Company F.