Reference no: EM132863396

Question - During the year ended December 31, 2018, Kelly's Camera Shop had sales revenue of $120,000, of which $60,000 was on credit. At the start of 2018, Accounts Receivable showed a $12,000 debit balance and the Allowance for Doubtful Accounts showed a $500 credit balance. Collections of accounts receivable during 2018 amounted to $58,000.

Data during 2018 follow:

a. On December 10, a customer balance of $1,000 from a prior year was determined to be uncollectible, so it was written off.

b. On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year.

1. Give the required journal entries for the two events in December.

2. Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet and income statement for 2018.

3. On the basis of the data available, does the 2 percent rate appear to be reasonable?

Megasoft Corporation develops, produces, and markets a wide range of computer software including the Windows operating system. Megasoft reported the following information about Net Sales Revenue and Accounts Receivable (all amounts in millions).

June 30, 2016 June 30, 2015

Accounts Receivable, Net of Allowance for Doubtful Accounts of $370 and $420 $ 18,050 $ 16,400

Net Revenues $ 82,000 $ 77,000

According to its Form 10-K, Megasoft recorded Bad Debt Expense of $7 and did not recover any previously written-off accounts during the year ended June 30, 2016.

1. What amount of accounts receivable was written off during the year ended June 30, 2016? (Enter your answer in millions.)

2. What was Megasoft's receivables turnover ratio in 2016? (Round your answer to 1 decimal place.)