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 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.

Journal
Date	Description	Debit	Credit
Jan. 17	Sales	9,700
	Bad Debt Expense		9,700
17	Bad Debt Expense	9,700
	Accounts Receivable-CJs Sports Corp.		9,700
21	Cash	10,700
	Bad Debt Expense	2,200
	Accounts Receivable-Four Seasons Sportswear Co.		12,900
Feb. 15	Accounts Receivable-Healthy Running Inc.	3,000
	Bad Debt Expense	500
	Sales		3,500
Mar. 4	Accounts Receivable-Four Seasons Sportswear Co.	2,200
	Bad Debt Expense		2,200
4	Cash	2,200
	Bad Debt Expense		2,200
13	Cash	5,540
	Accounts Receivable-Barbs Best Gear		5,540
31	Bad Debt Expense	20,970
	Accounts Receivable-Healthy Running Inc.		5,250
	Accounts Receivable-The Locker Room		4,100
	Accounts Receivable-CJs Sports Corp.		2,780
	Accounts Receivable-Get Your Gear Inc.		7,050
	Accounts Receivable-Ready-2-Go		1,790

Final Questions

Fan-Tastic Sports Gear Inc. recorded $3,100,000 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 400 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 0.75% 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.)

3. Using the allowance method, the net realizable value of the receivables would appear on which financial statement?