ACCT2010 Take Home Assignment #3

Question 1
(a)

Aging Schedule
Days Overdue Total
Customer
1 - 30 31 - 60 61 - 90 Over 90 Balance
$ $
Atomic $ 25000
20,000 5,000
$ $ $
Mechanical
2,000 6,000 8000
$ $
Rehearsal $ 12000
4,800 7,200
$
Lottery $ 20000
20,000
$ $ $
Housing
3,000 1,000 4000
$ $
All other accounts $ 12,000 $ 4,000 $ 80000
40,000 24,000
Total $ 65000 $ 34800 $ 40200 $ 9000 $ 0
Prospective bad
0.2% 0.8% 10% 85%
debt percentage
Estimated
$ 0 $ 0 $ 0 $ 0 $ 0
uncollectible amount

(b) Ending balance in Allowance for Doubtful Accounts = $12,078

(c)

General Journal
Date Description Debit Credit
$ $
Dec. 31 Bad Debt Expense (+E, -SE) 11,078
Allowance for Doubtful Accounts (+XA, -A) 11,078
(To record estimated uncollectible account receivables)

(d)

General Journal
Date Description Debit Credit
$ $
Dec. 31 Bad Debt Expense (+E, -SE) 13,878
Allowance for Doubtful Accounts (+XA, -A) 13,878
(To record estimated uncollectible account receivables)
Question 2
(a) Average accounts receivable collection period for the year 2021
(180,000 + 190,000) / 2
= × 365
2,500,000 × 0.7
= 38.6 days

Average accounts receivable collection period for the year 2022

(190,000 + 170,000) / 2
= × 365
2,000,000 × 0.7
= 46.9 days

(b) The average accounts receivable collection period was increased by 8.3 days from 2021 to 2022.
The company was less efficient to collect the amounts from its debtors in 2022 than in 2021.
Also, the credit period given by the company to its debtors were 30 days, while the average
accounts receivable collection periods in both 2021 and 2022 were higher than 30 days. This
shows that on average, the debtors repaid its amounts over the due date. The company was not
capable enough to turn receivables into cash, which can be used for the company’s daily
operations or investments. Thus, the company should find out the reason behind the inefficient
collection of accounts receivable, or whether the credit period is too unrealistic.