chapter 8-01 ?instructions

You have just been hired as the accountant for Fan-Tastic Sports Gear Inc., a wholesaler of sporting goods and apparel. The previous accountant left abruptly in late December, 20Y7, and an accounting intern has been drafting the journal entries since January. You are examining the accounting records before finalizing the journal entries for the first quarter of 20Y8. The following journal shows some of the accounts receivable transactions that you are reviewing.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1	Jan. 17	Sales		9,600.00				?
2		Bad Debt Expense			9,600.00			?
3	17	Bad Debt Expense		9,600.00				?
4		Accounts Receivable-CJs Sports Corp.			9,600.00	?
5	21	Cash		10,700.00		?
6		Bad Debt Expense		2,200.00				?
7		Accounts Receivable-Four Seasons Sportswear Co.			12,900.00	?
8	Feb. 15	Accounts Receivable-Healthy Running Inc.		3,000.00		?
9		Bad Debt Expense		500.00				?
10		Sales			3,500.00			?
11	Mar. 4	Accounts Receivable-Four Seasons Sportswear Co.		2,200.00		?
12		Bad Debt Expense			2,200.00			?
13	4	Cash		2,200.00		?
14		Bad Debt Expense			2,200.00			?
15	13	Cash		5,540.00		?
16		Accounts Receivable-Barbs Best Gear			5,540.00	?
17	31	Bad Debt Expense		20,970.00				?
18		Accounts Receivable-Healthy Running Inc.			5,150.00	?
19		Accounts Receivable-The Locker Room			4,100.00	?
20		Accounts Receivable-CJs Sports Corp.			2,780.00	?
21		Accounts Receivable-Get Your Gear Inc.			7,050.00	?
22		Accounts Receivable-Ready-2-Go			1,890.00	?

CHART OF ACCOUNTS

Fan-Tastic Sports Gear Inc.

General Ledger

	ASSETS
110	Cash
111	Petty Cash
121	Accounts Receivable-Healthy Running Inc.
122	Accounts Receivable-The Locker Room
123	Accounts Receivable-CJs Sports Corp.
124	Accounts Receivable-Get Your Gear Inc.
125	Accounts Receivable-Four Seasons Sportswear Co.
126	Accounts Receivable-Ready-2-Go
127	Accounts Receivable-Barbs Best Gear
132	Notes Receivable-Fast Feet Co.
136	Interest Receivable
141	Inventory
145	Office Supplies
151	Prepaid Insurance
181	Land
191	Store Equipment
192	Accumulated Depreciation-Store Equipment
193	Office Equipment
194	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
212	Unearned Rent
213	Customer Refunds Payable
215	Notes Payable

	EQUITY
310	Common Stock
311	Retained Earnings
312	Dividends
313	Income Summary

	REVENUE
410	Sales
610	Rent Revenue
612	Interest Revenue

	EXPENSES
510	Cost of Goods Sold
520	Sales Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Store Equipment
523	Delivery Expense
529	Miscellaneous Selling Expense
530	Office Salaries Expense
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Insurance Expense
534	Office Supplies Expense
536	Credit Card Expense
537	Cash Short and Over
538	Bad Debt Expense
539	Misc. Administrative Expense
710	Interest Expense

Finalize the journal entries shown on the Fan-Tastic Sports Gear Inc. panel and make any necessary changes. Refer to the Chart of Accounts for the exact wording of account titles. You may also use any items from the preceding list shown in (1), if needed. Fill in completely.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
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3. Journalize the entry needed to record information about the note receivable from Fast Feet for the year 20Y7. Assume that the entry on November 19, 20Y7 is correct. Refer to the Chart of Accounts of exact wording of account titles. Round all amounts to the nearest dollar.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2

Fan-Tastic Sports Gear Inc. recorded $3,000,000 of sales last year and projects sales to increase by $360,000 in the current year. Last year, 80% of sales were on account, with over 300 customer accounts. Bad debt expense was $26,187.

1.

Assume that Fan-Tastic Sports Gear Inc. used the allowance method last year, and the allowance account at the end of the year had a debit balance of $2,190. The company estimated uncollectible accounts expense using the percent of credit sales method and expected 0.85% of credit sales to be uncollectible. What is the amount of the adjusting entry to provide for doubtful accounts on December 31? Round all computations to the nearest dollar. $______________

2.

How much higher (lower) would Fan-Tastic Sports Gear Inc.s net income have been under the allowance method assumption previously shown in (1) than under the direct write-off method? (Enter 0 if there is no change.) by $ ________________