Comprehensive Marketable Securities, Accounts Receivable, Inventory Pratsky, Inc., had the following account balances:
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December 31, 1999 |
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|
Assets |
Liabilities |
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|
Cash |
$12,500 |
Accounts payable |
$10,000 |
|
Accounts Receivable |
22,400 |
Stockholders’ Equity: |
|
|
Allowance for |
Invested capital |
20,000 |
|
|
uncollectible accounts |
(3,400) |
Retained earnings |
19,000 |
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Inventory |
17,500 |
Total stockholders’ equity |
39,000 |
|
$49,000 |
$49,000 |
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During 2000, the corporation had the following transactions:
1. Issued common stock for $40,000 cash.
2. Purchased inventory on account; 200 units @ $38, then 150 units @ $39.
Note: Beginning inventory was comprised of 500 units @ $35.
3. Purchased 200 shares of IBM for $45/share and purchased 100 shares of Microsoft for $90/share.
4. Sales at retail during 2000 were $75,000 (half received in cash, and the balance on account).
5. Write offs of uncollectible accounts totaled $2,600.
6. Received $38,000 from receivable customers.
7. Paid creditors on account, $18,000.Paid operating expenses for the current period of $51,000.
8. At year end, a physical inventory equaled 225 units.The company uses the LIFO inventory costing method.
9. Assume that marketable securities are “available for sale,” and the market price at December 31, 2000, for IBM is $42/share, and for Microsoft $102/share.
10. Based on the accounts receivable aging, management feels that the allowance for uncollectible accounts should have a balance of $5,700 at yearend.
Required
a. Set up the beginning balances in the balance sheet equation. Leave enough room to add new columns as necessary.
b. Record transactions 1 through 10 using the balance sheet equation.
c. Calculate the following ratios for 1999 and 2000 and evaluate the company’s management of its accounts receivable:
• Accounts receivable/sales (assume that sales in 1999 were $125,786)
• Sales/day
• Collection period
• Allowance as a percentage of accounts receivable