Fortini Corporation had record sales in 2020. It began 2020 with an Accounts Receivable balance of $475,000 and an Allowance for Doubtful Accounts of $33,000. Fortini recognized credit sales during the year of $6,675,000 and made monthly adjusting entries equal to 0.5% of each month?s credit sales to recognize bad debt expense. Also during the year, the company wrote off $35,500 of accounts that were deemed to be uncollectible, although one customer whose $4,000 account had been written off surprised management by paying the amount in full in late September. Including this surprise receipt, $6,568,500 in cash was collected on account in 2020.

To assess the reasonableness of the allowance for doubtful accounts, the controller prepared the following aged listing of the receivables at December 31, 2020:

Instructions

a. Reconcile the 2020 opening balance in Accounts Receivable to the $550,000 ending balance on the controller?s aged listing.

b. Prepare the adjusting entry to bring the Allowance for Doubtful Accounts to its proper balance at year end.

c. Show how Fortini would present accounts receivable on the December 31, 2020 SFP.

d. What is the dollar effect of the year-end bad debt adjustment on the before-tax income?

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Days Account Outstanding Less than 16 days Between 16 and 30 days Between 31 and 45 days Between 46 and 60 days Between 61 and 75 days Over 75 days Probability of Collection Amount $270,000 117,000 97% 92% 80,000 80% 70% 20,000 25,000 50% 0% $550,000