Fan-Tastic Sports Gear Inc. You have just been hired as the accountant for Fan-Tastic Sports Gear Inc, a wholesaler of sporting goods and apparel. The previous accountant lot abruptly in late December, 2017, 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 2018. The following journal shows some of the accounts receivable transactions that you are reviewing Journal Date Description Debit Credit Jan. 17 Sales 9,600 Bad Debt Expense 9,600 9.600 17 Bad Debt Expense Accounts Receivable-cu's Sports Corp. 9,600 10.600 2.300 21 Cash Bad Debt Expense Accounts Receivable-Four Seasons Sportswear Co. 12.900 3,000 500 Feb, 15 Accounts Receivable Healthy Running Inc. Bad Debt Expense Sales 3,500 2,300 2.300 Mar. 4 Accounts Receivable-Four Seasons Sportswear Co. Bad Debt Expense 2.300 2,300 4 Cash Bad Debt Expense 5,540 5,540 13 Cash inte Receivable.Barb's Best Gear 20,670 Priit hom 31 Bad Debt Expense Accounts Receivable Healthy Running Inc Accounts Receivable-The Locker Room Accounts Receivable Sports Corp Accounts Receivable-Get Your Gear Inc Accounts Receivable-Ready-2-60 5,250 4,100 2,780 7,050 1,690 Recording Uncollectable Receivables Review the accounts receivable transactions shown in the general Journal on the Fan-Tastic Sports Gear Inc panel 1. How does the company appear to be handing uncollectible receivables? allowance method 2. You have made the following observations during your review of the accounting records. In deciding whether Fan-Tastic Sports Gear Inc. is handling uncollectible receivables appropriately, which of these observations are key factors in your decision? a. Most of the company's sales are on account. b. An analysis of the company's accounts receivable shows more accounts will be uncollectible than last year. C. Collection agencies are routinely used d. Company sales last year were $3,000,000 and are expected to increase by $350,000 this year, 6. Bad debt is a rising expense. 1. The company sells primarily to smaller businesses, who are more likely to have cash flow problems b. X X to record 3. After making the observations previously listed in (2), you have recommended that Fan-Tastic Sports Gear Inc, use the percent of sales method bad debt expense Frotock Note Receivable In the trial balance for March, you see that Notes Receivable Fast Feet Co. has a negative balance of $255, which would seem to indicate that Fast Feet paid too much Looking back through the journal entries for March, you find that on March 19 the accounting intern recorded receipt of 56,630 in Dayment of this not receivable. Further investigation reveals that on November 19, 2017, this note receivable was received from Rust Feet Co for $6,375. You can find no additional information about this note in the accounting records, Assume a 360 day year Using the preceding information, compute the term and the interest rate of the not receivable from Foot Feet 1. Term of the note 120 days 2. Interest rate of the note 9 X 90 Feedback Check My W 1. Use the equation for computing interest on a notebut solve for the term 2. Use the equation for computing interest on a note but solve for the interest rate 3. Journalize the entry needed to record information about the note receivable from Fast Feet for the year 2017. Assume that the entry on November 19, 2017 is correct If an amount box does not require an entry, leave it blank. Round all amounts to the nearest dollar Dec 31 Notes Receivable-Fast Feet Co. X 19 Interest Revenue Freda Check My Work 3. How much interest was eamed on this note in 2017? tended to record collection of the note at maturity on March 19, 20Y8. Assume that the entry on November 19, 2017 is correct. If an amount box 4. Joumalize the entry needed to record collection of the note at maturity on March 19, 2018. Assume that the entry on November 19, 2017 is correct. If an amount box does not require an entry leave it blank. Round all amounts to the nearest dollar Mar 19 Cash 8.755 X Notes Receivable-Fast Feet Co. 3.600 x Interest Receivable #9 Interest Revenue 166 Web TO WW 4. Remember to consider that the note was issued and collected at malurty in different years Final Questions Fan-Tastic Sports Gear Inc. recorded $3,000,000 of sales last year and projects sales to increase by $350,000 in the current year, Last year 90% of sales were on account, with over 300 customer accounts. Bad debt expense nas $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 0.75% of credit sales to be uncollectible. What is the amount of the adjusting entry to provide for doubtful accounts on December 317 Round all computations to the nearest dollar 2. How much higher clower) would Fan-Tastic Sports Gear Inc.'s net income have been under the allowance method assumption previously shown in (1) than under this direct write-off method? (Enter *O* if there is no change.) Lower X by 3. Using the allowance method, the net realizable value of the receivables would appear on which financial statement schedule of accounts receivable Festack