Question

Task 1: At December 31, 2019, House Co. reported the following information on its balance sheet. Accounts receivable $960,000 Less: Allowance for doubtful accounts 80,000 During 2020, the company had the following transactions related to receivables: Sales on account $3,700,000 Sales returns and allowances 50,000 Collections of accounts receivable 2,810,000 Write-off s of accounts receivable deemed uncollectible 90,000 Recovery of bad debts previously written off as uncollectible 29,000 Instructions Prepare the journal entries to record each of these fi ve transactions. Assume that no cash discounts were taken on the collections of accounts receivable. Enter the January 1, 2020, balances in Accounts Receivable and Allowance for Doubtful Accounts, post the entries to the two accounts (use T-accounts), and determine the balances. Prepare the journal entry to record bad debt expense for 2020, assuming that an aging of accounts receivable indicates that expected bad debts are $115,000. Compute the accounts receivable turnover for 2020 assuming the expected bad debt information provided in c. Task II: Suppose the amounts presented here are basic financial information (in millions) from the 2020 annual reports of Nike and adidas. Nike adidas Sales revenue $19,176.1 $10,381 Allowance for doubtful accounts, beginning 78.4 119 Allowance for doubtful accounts, ending 110.8 124 Accounts receivable balance (gross), beginning 2,873.7 1,743 Accounts receivable balance (gross), ending 2,994.7 1,553 Instructions: Calculate the accounts receivable turnover and average collection period for both companies. Comment on the difference in their collection experiences

Answer 1

The student's question involves complex financial calculations related to accounts receivable, including turnover rates, average collection periods, and recording of various accounting transactions for House Co., Nike, and Adidas.

Step-by-step explanation:

The question involves calculating and analyzing accounts receivable turnover and the average collection period using given financial data for two companies. Additionally, there is a requirement to understand and record various transactions related to accounts receivable and the allowance for doubtful accounts for House Co.

For the example of House Co., journal entries would be required for sales on account, sales returns, collections, write-offs, and recoveries. Balances in Accounts Receivable and Allowance for Doubtful Accounts would need to be updated accordingly. Finally, the bad debt expense would be recorded based on an aging schedule.

In the case of Nike and Adidas, the accounts receivable turnover is calculated by dividing total net sales by the average accounts receivable during the period. The average collection period demonstrates how many days, on average, it takes to collect receivables and is calculated by dividing the number of days in a period by the accounts receivable turnover ratio.