During 20X1, Lau Inc. recorded credit sales of $1,500,000. Based on prior experience, it estimates a 1 percent bad debt rate on credit sales. At the beginning of the year, the balance in trade receivables, net was $100,000. At the end of the year, but before the bad debt expense adjustment was recorded and before any bad debts had been written off, the balance in trade receivables, net was $125,000.
1. Assume that on December 31, 20X1, the appropriate bad debt expense adjustment was recorded for the year 20X1 and trade receivables totaling $10,000 were written off for the year, what was the receivables turnover ratio for the year?
2. Assume that on December 31, 20X1, the appropriate bad debt expense adjustment was recorded for the year 20X1 and trade receivables totaling $12,000 were written off for the year, what was the receivables turnover ratio for the year?
3. Explain why the answers to parts 1 and 2 differ or do not differ .

Question

During 20X1, Lau Inc. recorded credit sales of $1,500,000. Based on prior experience, it estimates a 1 percent bad debt rate on credit sales. At the beginning of the year, the balance in trade receivables, net was $100,000. At the end of the year, but before the bad debt expense adjustment was recorded and before any bad debts had been written off, the balance in trade receivables, net was $125,000. 
1. Assume that on December 31, 20X1, the appropriate bad debt expense adjustment was recorded for the year 20X1 and trade receivables totaling $10,000 were written off for the year, what was the receivables turnover ratio for the year? 
2. Assume that on December 31, 20X1, the appropriate bad debt expense adjustment was recorded for the year 20X1 and trade receivables totaling $12,000 were written off for the year, what was the receivables turnover ratio for the year? 
3. Explain why the answers to parts 1 and 2 differ or do not differ .

Quizplus · Accepted Answer

The Answer of During 20X1, Lau Inc. recorded credit sales of $1,500,000. Based on prior experience, it estimates a 1 percent bad debt rate on credit sales. At the beginning of the year, the balance in trade receivables, net was $100,000. At the end of the year, but before the bad debt expense adjustment was recorded and before any bad debts had been written off, the balance in trade receivables, net was $125,000. 
1. Assume that on December 31, 20X1, the appropriate bad debt expense adjustment was recorded for the year 20X1 and trade receivables totaling $10,000 were written off for the year, what was the receivables turnover ratio for the year? 
2. Assume that on December 31, 20X1, the appropriate bad debt expense adjustment was recorded for the year 20X1 and trade receivables totaling $12,000 were written off for the year, what was the receivables turnover ratio for the year? 
3. Explain why the answers to parts 1 and 2 differ or do not differ .