Estimating Bad Debts from Receivables Balances
Response to the following problem:
The following information is extracted from the accounting records of the Shelton Corporation at the beginning of 2010:
Accounts Receivable $63,000
Allowance for Doubtful Accounts 1,400 (credit)
During 2010, sales on credit amounted to $575,000, $557,400 was collected on outstanding receivables, and $2,600 of receivables were written off as uncollectible. On December 31, 2010, Shelton estimates its bad debts to be 4% of the outstanding gross accounts receivable balance.
Required
1. Prepare the journal entry necessary to record Shelton's estimate of bad debt expense for 2010.
2. Prepare the Accounts Receivable section of Shelton's December 31, 2010 balance sheet.
3. Compute Shelton's receivables turnover.
4. If Sheldon Company uses IFRS, what might be the heading for the accounts receivable section in Requirement 2?