During 20A, Lau Inc

Essay

During 20A, 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, 20A, the appropriate bad debt expense adjustment was recorded for the year 20A and trade receivables totalling $10,000 were written off for the year, what was the receivables turnover ratio for the year?
2. Assume that on December 31, 20A, the appropriate bad debt expense adjustment was recorded for the year 20A and trade receivables totalling $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.