Question

Exercise 7-21 Presented below is information for Metlock Company. 1. Beginning-of-the-year Accounts Receivable balance was $23,200. 2. Net sales (all on account) for the year were $106,000. Metlock does not offer cash discounts. 3. Collections on accounts receivable during the year were $82,500. Metlock is planning to factor some accounts receivable at the end of the year. Accounts totaling $12,400 will be transferred to Credit Factors, Inc. with recourse. Credit Factors will retain 7% of the balances for probable adjustments and assesses a finance charge of 6%. The fair value of the recourse obligation is $1,188.

Prepare the journal entry to record the sale of the receivables. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS Accounts Payable Accounts Receivable Advertising Expense Allowance for Doubtful Accounts Bad Debt Expense Cash Cash Over and Short Due from Factor Due to Customer Discount on Notes Payable Discount on Notes Receivable Freight-In Freight-Out Gain on Disposal of Land Interest Expense Interest Payable Interest Receivable Interest Revenue Inventory Land Loss on Sale of Receivables Miscellaneous Expenses No Entry Notes Payable Notes Receivable Office Expense Owner's Drawings Petty Cash Postage Expense Purchase Discounts Recourse Liability Sales Discounts Sales Discounts Forfeited Sales Revenue Service Revenue Supplies Supplies Expenses Unearned Sales Revenue

Compute Metlock’s accounts receivable turnover for the year, assuming the receivables are sold. (Round answers to 2 decimal places, e.g. 4.57.) Accounts receivable turnover times Days to collect accounts receivable days

Answer 1

Journal Entry-metlock Company
S. No.	Accounts Titles and Explanations	Debit	Credit
1	No entry
2	Accounts Receivables	106,000
	Sales		106,000
	To Record Sales made on Account
3	Cash	82,500
	Accounts Receivables		82,500
	To Record Collection Made

Acccount receivable Turnover=Credit sales / Average receivable

Average receivable = (Beginning Receivable + Ending Receivable)/2

( 23200+ ( 23200+106000-82500))/2

$34950/2=17475

Account Receivable Turnover= $106000/17475=6.07 times

Day to Collect account receivable = 365/ Account receivable turnover ratio

=365/6.07=60.13 days