At December 31, 2011, Littman Company reported this information on its balance sheet.
Accounts receivable $960,000
Less: Allowance for doubtful accounts 78,000
During 2012, the company had the following transactions related to receivables.
1. Sales on account $3,600,000
2. Sales returns and allowances 50,000
3. Collections of accounts receivable 3,100,000
4. Write-offs of accounts receivable deemed uncollectible 92,000
5. Recovery of bad debts previously written off as uncollectible 28,000
(a) Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable. (Omit cost of goods sold entries.)
(b) Enter the January 1, 2012, balances in Accounts Receivable and Allowance for Doubtful Accounts, post the entries to the two accounts (use T accounts), and determine the balances.
(c) Prepare the journal entry to record bad debts expense for 2012, assuming that aging the accounts receivable indicates that expected bad debts are $109,000.
(d) Compute the receivables turnover ratio and average collection period.