Vladulac Corporation began 2017 with accounts receivable of $180,000 and an allowance for uncollectible accounts of $13,000 (credit balance). Bad debt expense for the year was $25,000 and the ending balance in the allowance for uncollectible accounts account was $16,000. The accounts receivable turnover ratio for 2017 was 10.0. NOTE: This ratio was calculated using the average of gross accounts

receivable in the denominator (that is, [$180,000 + year-end accounts receivable] divided by 2).

The following additional information is also available:
Inventory turnover ratio
8.0
Average inventory
$150,000
Gross profit ratio
40

Required:
a. What was the amount of accounts receivable written off during the year?
b. What was the amount of cash collected from customers during the year? Assume that all sales are made on a credit basis and that there were no collections of previously written off receivables or sales returns.

What will be an ideal response?

Answer:
a.
$13,000 (beginning allowance) + 25,000 (bad debt expense) - 16,000 (ending allowance) = $22,000 in write offs
b.
CGS = 8.0 × $150,000 = $1,200,000Sales equals $1,200,000 / (1 - 0.40) = $2,000,000$2,000,000 / 10 = $200,000 = average receivablesTherefore, since beginning receivables are $180,000, ending receivables must be $220,000$180,000 (beginning balance) + 2,000,000 (sales) - 22,000 (write offs) - 220,000 (ending balance) = $1,958,000 (cash collections)