Accounting for receivables and uncollectible accounts
the following transactions occurred over the months of september to december at nicole's getaway spa (ngs).
september sold spa merchandise to ashley welch beauty for sl,800 on account; the cost of these goods to ngs was
s900.
october sold merchandise to kelly fast nail gallery for s450 on account; the cost of these goods to ngs was s200.
november sold merchandise to raea gooding wellness for s300 on account; the cost of these goods to ngs was $190.
december received $1,200 from ashley welch beauty for payment on its account.
required:
1. prepare journal entries for each of the transactions. assume a perpetual inventory system.
2. estimate the allowance for doubtful accounts required at december 31, assuming the only receivables outstanding at
december 31 arise from the transactions listed above. ngs uses the aging of accounts receivable method with the
following uncollectible rates: one month, 2%; two months, 596; three months, 20%; more than three months, 35%.
3. the allowance for doubtful accounts balance was s47 (credit) before the end-of-period adjusting entry is made.
prepare the journal entry to account for the bad debt expense.
4. assume the end of the previous year showed net accounts receivable of $800, and net sales for the current year are
9,000. calculate the accounts receivable turnover ratio (round to one decimal place).
5. audrey's mineral spa has an accounts receivable turnover ratio of 12.0 times. how does ngs compare to this
competitor?