During 2014, Charles Inc

Essay

During 2014, Charles Inc. recorded credit sales of $2,000,000. Based on prior experience, it estimates a 1 percent bad debt loss rate on credit sales. At the beginning of the year, the balance in net accounts receivable was $150,000. 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 net accounts receivable was $125,000.
A. Assume that on December 31, 2014, the appropriate bad debt expense adjustment was recorded for the year 2014 and accounts receivable totaling $16,000 was written off for the year. What was the accounts receivables turnover ratio for the year?
B. Assume that on December 31, 2014, the appropriate bad debt expense adjustment was recorded for the year 2014 and accounts receivable totaling $12,000 was written off for the year. What was the accounts receivables turnover ratio for the year?
C. Explain why the answers to parts A and B differ or do not differ.