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

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 handling uncollectible receivables?

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 companys sales are on account.

b. An analysis of the companys accounts receivable shows more accounts will be uncollectible than last year.

c. Collection agencies are routinely used.

d. Company sales last year were $3,100,000 and are expected to increase by $360,000 this year.

e. Bad debt is a rising expense.

f. The company sells primarily to smaller businesses, who are more likely to have cash flow problems.

3. After making the observations previously listed in (2), you have recommended that Fan-Tastic Sports Gear Inc. use the